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First Cut: Housing starts improve in April, but permits issued hint that activity may be restrained as the spring progresses

Starts of new homes in April rose 5.7% to 1.235 million units (SAAR), although the level was 2.5% below a year ago. Starts of single-family homes were up a solid 6.2% to 854,000, but down 4.3% compared to a year earlier.  Multi-unit starts were up 4.7% from the prior month and 1.6% higher than April 2018. The report included annual revisions.

Starts were uneven across regions in April from March. The Northeast saw an explosion of starts at up 84.6%, and the Midwest surged 42.0%. In both cases there may be some weather impact as late winter storms prevented breaking new ground into March. Starts continued soft in the South for third month in a row and were down 5.7% in April. There could be some continuing impact after a rise in starts in in late 2018 when recovery efforts were under way after two major hurricanes. There may also be delays related to uncertainty regarding building code changes after the storms. Starts in the West declined 5.5% although that was on the heels of a 36.7% uptick in March. The West continues to rebuild after wildfires destroyed housing stock in the fall of 2018.

Permits issue in April were up a mild 0.6%. However, it was the first month-over-month gain since December 2018. The increase was due to an 8.9% increase for multi-unit permits while single-family permits fell 4.2%. Some of this may be related home affordability and new homebuyers wanting to enter the market with purchase of a smaller unit. New households often prefer a townhome or condo before eventually trading up after building equity.

Permit numbers across regions were mixed. There were gains in the Midwest of up 2.2% and the West of up 5.3%, while permits were lower at down 1.2% in the South and down 4.0% in the Northeast.

The levels of permits issued do not suggest an immediate strong pick up in new construction this spring, but that could change if low mortgage rates continue and potential homebuyers opt for new construction in the face of limited supplies of existing units.

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