April 2024 Housing Starts: Builders Cautiously Scale Back New Home Construction As Expectations Shift

• Building permits issued in April decreased to 1,440,000 (SAAR). That’s 3% below the revised March rate and 2% lower than a year ago.
• Housing starts increased to 1,360,000 (SAAR) in April, up 5.7% from the revised March estimate but 0.6% lower than a year ago, according to the U.S. Census Bureau. 
• Single-family housing starts decreased to 1,031,000 (SAAR) in April, down 0.4% from March and 17.7% above last April. Despite the recent decrease, single-family construction drove most of the increase in housing starts in the past year.

What happened: With more homes being completed and no clear line of sight into the path of interest rates, builder confidence fell and many of them scaled back on starting new projects. Despite the slowdown, single-family housing starts remain nearly 18% above last year’s pace. Construction on buildings with 5 or more units is nearly 33% lower than a year ago - attributed in large part to the already large number of apartment buildings being completed and easing apartment rent growth.

Why this matters: The slowdown in single-family housing starts could reflect a cautious outlook from builders largely due to higher than expected interest rates and relatively steadier housing demand during a time of year when acceleration is typically expected.

Resale inventory is also increasing. According to Zillow data, homes that sold went pending in just 13 days - unchanged from a month ago. While appropriately priced homes still sell fast, many expected the pace to increase. Total for sale inventory is now up 18% from this time last year.

The housing stock is growing and builders continue to add to the inventory count. In April, single-family home completions saw a 14% uptick from last year. With more homes coming on the market and no equally large uptick in housing sales, total for-sale housing inventory is higher than it was a year ago.

Last month, 25% of builders cut prices compared to 22% of builders a month ago, ending four months of consecutive declines in this metric according to the National Association of Home Builders. As mortgage rates increased, the use of incentives also ticked up. Meanwhile, the average price cut remains stable at 6%.

With mortgage rates falling back below 7%, demographic factors as well as rising inflation-adjusted incomes and wealth should continue to support housing demand in the months ahead.