Both housing starts and building permits drop in April

Housing starts fell 31,000 to 1.1 million units in April from a downwardly revised 1.2 million units in March. The multifamily segment accounted for the entirety of the decline. Building permits also dropped to 1.2 million in April. Here, single family units accounted for the disappointment. Housing activity in both the Northeast and the South dropped while the Midwest and West did well.

Despite the disappointing numbers, the single family segment remained on an upward trend. This is reflective of continued labor market progress that underpins strong demand for new homes as rising wages support household formation.

While the decline in permit activity suggests some caution that may be related to elevated new home prices and the rise in interest rates, we expect strong wage and income growth in the coming months to support demand for new homes.

Despite builders continuing to face rising costs for building materials, e.g., softwood lumber, their confidence in the market persists. Low inventory levels continue to pressure prices up, attracting builders to the market. Going forward, residential investment should continue to be supportive for overall economic growth.