New-home starts fell a surprising 9.5% in April. Builders say buyers are dropping out of the market because rising costs for raw materials keeps pushing prices higher.
WASHINGTON – Housing production fell in April, and builders say the drop is due to a higher cost for building materials that has priced out potential homebuyers.
Overall, housing starts decreased 9.5% to a seasonally adjusted annual rate of 1.57 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
The April reading of 1.57 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 13.4% to a 1.09 million seasonally adjusted annual rate. However, the multifamily sector, which includes apartment buildings and condos, increased 0.8% to a 482,000 pace.
“Housing starts and permits posted a monthly decline in April, as escalating prices for lumber and other building materials price out some homebuyers from an otherwise hot housing market,” says NAHB Chairman Chuck Fowke, a custom home builder from Tampa. “Policymakers need to prioritize the U.S. supply chain for items like building materials to ensure builders can add the additional inventory the housing market desperately needs.”
NAHB Chief Economist Robert Dietz says the small number of new building permits recorded in April “indicates that builders are slowing construction activity as costs rise. While housing starts were strong at the beginning of the year … higher costs and limited availability of building materials have now paused some projects.”
Overall permits increased 0.3% to a 1.76 million unit annualized rate in April. However, single-family permits decreased 3.8% to a 1.15 million unit rate, while multifamily permits increased 8.9% to a 611,000 pace.
Looking at regional permit data compared to the previous month, permits were 8.4% higher in the Northeast, 9.9% lower in the Midwest, 3.9% higher in the South and 4.1% lower in the West.
Another indication of a new-home slowdown is seen in the number of building permits issued where construction has not yet started. In April, that number increased, rising to 131,000 units. That number is 47% higher than a year ago, which NAHB attributes to building material cost increases and delays.
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