Construction Starts Pulled Back in April Due to Supply Problems

Housing starts fell back from the annual rate of 1,733,000 units reported for March. Residential starts in April were down 9.5 percent to a seasonally adjusted annual rate of 1,569,000 units. This was also a slight rollback for the March estimate, which was originally reported at 1,739,000 million units. At that level, they were the highest since June 2006 and represented a 19 percent jump from February. Even with April's pullback, starts during last month are up 67.3 percent from a year earlier when the nation was in the midst of the pandemic lockdown.

After the surge in April, a slight retreat was anticipated, but analysts surveyed by Econoday had expected they would remain above 1.7 million. The Census Bureau/Housing and Urban Development report, however, came in below their lightest estimates. The consensus was 1.705,000 units with a range from 1,600,000 to 1,770,000.

Single family starts were even more disappointing. They were at an annual rate of 1,087,000, down 13.4 percent from March's 1,255,000 (revised from 1,199,000) units, but 58.7 percent higher than a year earlier. Multifamily units were up 4.0 percent from March at 470,000 units and 97.5 percent higher than the April 2020 rate.

On a non-adjusted basis there were 140,900 starts in April, 99,800 of which were single-family houses. The respective starts in March were 141,400 and 102,800.

For the year-to-date (YTD) starts have totaled 499,500 compared to 414,100 over the same period in 2020, a 20.6 percent rate of growth. There have been 355,200 single-family starts and 139,300 multifamily starts thus far in 2021, 28.0 percent and 5.4 percent increases over the first four months last year.

Permits improved slightly from March, ticking up 0.3 percent to a seasonally adjusted annual rate of 1,760,000 units, a 60.9 percent year-over-year gain. The March rate of 1,755,000 was a downward revision from the original report of 1,766,000 units.

Analysts were fairly on target with their estimates for permits. They were looking for results in the range of 1,700,000 to 1,800,000 with a consensus of 1,780,000.

Single family permits were issued at an annual rate of 1,149,000, down 3.8 percent from the revised estimate (from 1.199,000)  of 1,194,000 units in March and 70.7 percent above the April 2020 rate. Multifamily permits rose 11.1 percent to 559,000 units.

On a non-adjusted basis permits were issued to construct 160,600 units during the month compared to 157,600 units in March. Single-family permits dipped to 108,100 from 110,800.

YTD, permitting is up 32.2 percent from the same period last year to 567,900 units. There have been 384,200 single-family permits issued, a 36.1 percent increase and multi-family permitting is 24.4 percent higher at 167,000 units.

Mike Fratantoni, the Mortgage Bankers Association's SVP and chief economist, said the declines in permits and starts were not that surprising. "Single-family starts in April dropped more than 13% compared to last month, but permits to build single-family homes saw a smaller decline," he said. "This is consistent with reports that builders are delaying starting new construction because of the marked increase in costs for lumber and other inputs. Moreover, builders are also reporting difficulty obtaining other inputs like appliances. These supply chain constraints are holding back a housing market that should otherwise be picking up speed, given the strong demand for buying fueled by an improving job market and low mortgage rates. Even with these challenges, there are roughly 640,000 new homes under construction right now, a helpful addition to low supply levels."

Completions were down 4.4 percent from March at a rate of 1,449,000 units, a 21.7 percent annual increase. The single-family completion rate edged up 0.1 percent to 1,045,000, a 20.8 percent annual gain. Multifamily completions, at a 401,000 pace, was down 13.8 percent for the month but 26.5 percent higher than a year earlier.

On an unadjusted basis there were 115,400 units completed during the month, 83,600 of them single-family houses. The respective numbers in March were 121,900 and 84,800 units.

YTD builders have completed 425,600 housing units, a 12.8 percent increase over the 377,300 units during the same period in 2020. Single-family completions are up 13.9 percent to 313,200 units and there have been 110,800 multifamily units completed, a 11.2 percent improvement.

At the end of April there were an estimated 1,312,000 million units under construction, 642,000 of them single-family houses. There were another 232,000 permits which had been issued but under which construction had not started. The backlog of single-family permits was estimated at 131,000.

Starts in the Northeast rose 6.2 percent from the prior month and were 244.0 percent higher year-over-year. Permits increased 8.4 percent and 171,0 percent from the two earlier periods. Completions were down 8.6 percent from March but 98.3 percent higher than the prior April.

Starts in the Midwest dropped 34.8 percent from March but remain 40.9 percent higher on an annual basis. There was a 9.9 percent decline in permitting for the month, but authorizations rose 56.2 percent year-over-year. Completions fell by 16.9 percent but were 7.7 percent higher annually.

The South saw starts drop 11.5 percent for the month, remaining 41.3 percent higher on an annual basis. Permits increased by 3.9 percent from March and 48.0 percent from a year earlier. Completions ticked down 1.7 percent but were 17.2 percent above year earlier figures.

Starts rose 9.0 percent in the West compared to March and were 119.8 percent higher than the prior April. Permits decreased 4.1 percent but remained 69.1 percent higher for the year. Completions were 1.2 percent fewer than the prior month but 25.0 percent higher than a year earlier.