U.S. Housing Starts Rebound Less Than Expected In April, Building Permits Pull Back Sharply

(RTTNews) - While the Commerce Department released a report on Friday showing a rebound by new residential construction in the U.S. in the month of April, the report also showed a substantial pullback by building permits during the month.

The Commerce Department said housing starts shot up by 1.6 percent to an annual rate of 1.361 million in April after plummeting by 10.1 percent to a revised rate of 1.339 million in March.

However, economists had expected housing starts to surge by 3.5 percent to a rate of 1.370 million from the 1.324 million originally reported for the previous month.

"Soft housing starts in April are another sign that builders are hitting the brakes this year in response to high uncertainty for costs and future demand," writes Nationwide Senior Economist Ben Ayers.

"This environment makes it risky for home builders to start new projects, especially for time-consuming multifamily structures," he added. "We expect starts to fade further over the summer as conditions remain challenging for builder profitability."

The smaller than expected rebound by housing starts came as a sharp increase by multi-family starts was partly offset by a continued slump by single-family starts.

While multi-family starts soared by 10.7 percent to an annual rate of 434,000, single-family starts tumbled by 2.1 percent to an annual rate of 927,000.

Meanwhile, the report said building permits plunged by 4.7 percent to an annual rate of 1.412 million in April after jumping by 1.9 percent to a revised rate of 1.481 million in March.

Building permits, an indicator of future housing demand, were expected to slump by 2.2 percent to a rate of 1.450 million from the 1.482 million originally reported for the previous month.

Single-family permits plummeted by 5.1 percent to an annual rate of 922,000, while multi-family permits dove by 3.7 percent to an annual rate of 490,000.

"A drop in building permits suggests that starts may drop further in coming months as multiple headwinds work against residential construction," said Ayers. "While the highest tariffs rates have been pushed off for now, the price and availability of construction materials remains highly volatile."

On Thursday, the National Association of Home Builders released a separate report showing an unexpected slump by U.S. homebuilder confidence in the month of May.

The report said the NAHB/Wells Fargo Housing Market Index tumbled to 34 in May after inching up to 40 in April. Economists had expected the index to come in unchanged from the previous month.

With the unexpected decrease, the housing market index ties the November 2023 reading as the lowest since hitting 31 in December 2022.