Housing Starts Unexpectedly Strengthen, but Permits Fall Dramatically

Housing starts unexpectedly rose in April, after March's figure was revised lower. Starts rose 2.5% when the market expected them to fall 3.5% in April. The number of new starts was evenly split between single and multi-family categories, but on a percentage basis, multi-family starts grew 6.3% versus 1.6% MoM for single-family homes. Starts held steady in the South, but fell 14% MoM in the Midwest. Starts rose a substantial 31% MoM in the Northeast, and 8% in the West.

Housing permits fell 9%, based on the revised higher level of March. Again,the actual decline in number of permits was fairly evenly split between single- and multi-family starts, but multi-family permits fell -16.4% MoM versus -6% for single-family permits. All regions saw declines in permit demand in April, the West leading the decline at -14% MoM, followed by the Midwest and South at about half the pace of decline in the West, followed by the Northeast at -5.4% MoM.

Housing under construction and completed both continue to slowly decline, as existing projects are finished and new projects grow more scarce.

Over the past year, housing starts are down -16.6% YoY, primarily due to a -19.6% YoY decline in single-family starts. Multi-family starts are only down -1.6% YoY. Housing permits are now down a much more substantial -27.6% YoY, and are more evenly split between single- and multi-family construction. Homes under construction are down -15% YoY. Completed homes awaiting buyers have declined -25.5% YoY, but are at a 27 year high based on the current sales rate.

The softening in permits is probably a good sign of continuing resolve at reduction of inventory overhang in the future, as starts are likely to decline in the next few months. Inventories are expected to remain high through the remainder of this year though.