The U.S. Department of Commerce released its Housing Starts Summary for April this week, and while the short-term story reflects a dip in production, the trend of recovery continues.
First, the bad news. Construction for dwellings with five or 
more units took a hit, and was down 37.8% from March. Single-family home production made a much smaller decline at 2.1% month-to-month with many experts pointing to lack of supply of materials and available land as the culprit. The bigger picture in April’s Housing Starts Summary is that permits, a major indicator for future construction, are up 35.8% from April 2012, and housing starts for single-family homes are up 13.1% from last year.
Builder confidence was also up 3 points in the National Association of Home Builder’s latest Housing Market Index, reinforcing the housing industry’s general feeling of well-being. The Housing Starts Summary shows that while there may be bottlenecks in meeting buyer demand for new homes and apartments, gains are still being made. Also bolstering consumer confidence and new home demand are low interest rates and improving employment conditions, as noted by Ksenia Bushmeneva, at economist at TD Economics. Insiders believe this drop in starts is temporary and not part of a bigger trend, as evidenced by growth in permits according to the Housing Starts Summary.
Not only are builders more confident because they are experiencing higher traffic. The module measuring buyer traffic for new homes increased 3 points in this months HMI to 33. NAHB Chairman Rick Judson stated: “Builders are noting an increased sense of urgency among potential buyers. This is definitely an encouraging sign.” Indeed, affordability is up as 73.7% of homes sold from January to March were within means of U.S. families earning the median income of $64,400.
While the month-to-month starts may have experienced a temporary slowdown, the future depicted in this month’s Housing Starts Summary is encouraging due to substantial year over year growth since 2012. Economists and homebuilders agree that the growth is likely to continue.
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Sources
1) http://www.census.gov/construction/nrc/pdf/newresconst.pdf
2) http://www.marketwatch.com/story/april-home-construction-falls-to-six-month-low-2013-05-16