US homebuilding picked up in April, reversing the decline seen in March, a new government report shows, but lingering challenges still hamper new home production.
The number of homes, including new construction of both single and multi-family homes, increased by 2.2% to a seasonally adjusted annual rate of 1,401 million units in April, according to the Census Bureau Wednesday, from March’s revised rate of 1.371 million. That was 22.3% lower than a year ago and only a hair higher than the 1.4 billion units that economists polled by Bloomberg had predicted.
Applications to build fell 1.5% to an annual rate of 1.416 million units in April, compared to a revised 1.437 million in the previous month, with a steep decline in multi-family housing more than outpacing the increase on the single-family side. compensated. The figure was lower than the Bloomberg consensus expectation of 1.430 million.
The improvement in starts and permits in single-family home construction is a slight relief to homebuyers challenged by low inventory for sale. However, the acceleration is still not enough to solve the housing shortage, a problem that has had a snowball effect for more than a decade.
“My team’s estimate of the housing shortage is about 1.5 million homes,” Robert Dietz, chief economist for the National Association of Home Builders, told Yahoo Finance. “We need to build more than 1.1 million single-family homes a year to meaningfully reduce that shortfall.”
Single-family home starts in April were up 1.6% from March to a seasonally adjusted annual rate of 846,000.
At the same time, building permits for the construction of single-family homes rose to a seasonally adjusted annual rate of 855,000, up 3.1% from March’s revised rate of 829,000.
On the multifamily side, April starts increased 5.2% to a seasonally adjusted annual rate of 542,000 from 515,000 in March.
Multi-family building permits fell 9.7% to a seasonally adjusted annual rate of 502,000 from 556,000 in March.
New single-family homes are now an even more important part of the housing market.
According to Dietz, the lack of existing homes on the market has driven more buyers to new construction. More than a third of homes going on the market in April were new construction, the National Association of Home Builders estimated, while that share is typically 13%.
Overall, there was less than three months of stock resale inventory, the National Association of Realtors said. Six months supply is considered a balanced market.
The imbalance has helped bolster builders’ housing confidence, which reached its peak highest point in 10 months in May. The limited resale stock gave developers an added edge, allowing them to cut back on markdowns and other incentives.
Builders are still facing headwinds.
“I’ve called the supply-side issues the five L’s,” Dietz said, ticking off labor shortages, land shortages, borrowing problems, legal/regulatory burdens, and lack of wood/building materials.
According to Dietz, construction time took a whopping 8.5 months due to supply chain issues last year, compared to the usual 6-7 months.
The recent banking turmoil that has hit regional banks has only worsened the credit environment, with developers facing tighter credit conditions alongside the Federal Reserve’s year-long rate hike campaign.
“We’re not talking about mortgages, we’re talking about loans to builders and developers and land to carry out construction projects,” he said. “That’s going to be something we’ll be looking at going forward.”
Gabriella is a personal financial reporter at Yahoo Finance. Follow her on Twitter @__gabriellacruz.
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