| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Starts - Annual Rate | 1.362M | 1.310M to 1.414M | 1.361M | 1.324M | 1.339M |
| Permits - Annual Rate | 1.450M | 1.430M to 1.470M | 1.412M | 1.482M | 1.481M |
Highlights
Starts of new homes are up 1.6 percent in April to a seasonally adjusted annual rate of 1.361 million units, a close match to the 1.362 million units in consensus forecast in the Econoday survey. Starts are down 1.7 percent compared to 1.385 million units in April 2024. Overall, starts of new homes are comparatively soft.
New home construction is facing several challenges. Although plunging confidence does not necessarily mean consumers won't consider buying a newly built home, it does mean some will hesitate until fears about an economic downturn and/or job losses have eased. With many consumers on the fence about buying a new home, homebuilders will not start homes on speculation. Also, supplies of existing units are providing competition to homebuilders' projects, especially for single-family units. Some starts will be delayed due to tariffs introducing uncertainty about the cost of materials. Skilled labor costs are also a consideration. Finally, mortgage rates remain uncomfortably close to the 7 percent-mark, a level that discourages interest rate sensitive homebuyers as eating too far into home affordability.
The April month-over-month increase is entirely due to a rise in multi-unit home starts. The level is up 10.7 percent to 434,000 in April from March and jumps 30.7 percent compared to a year ago. Starts of single-family homes are down 2.1 percent to 927,000 in April from March and off 12.0 percent from 1.053 million a year ago. Homebuilders have seen falling buyer traffic for new single-family units and are less willing to build while mortgage rates remain elevated and materials costs and availability unsettled. When single-family homes are less affordable, the market for multi-unit homes is often better.
Permits-issued in April are down 4.7 percent to 1.412 million and below the consensus of 1.450 million in the Econoday survey of forecasters. Permits-issued are down 3.2 percent from 1.459 million a year ago. Fewer permits mean fewer projects being started in the near future.
Permits-issued for single-family homes are down 5.1 percent to 922,000 in April from March, and 6.2 percent lower than 1.459 million a year ago. This points to further weakening in construction of new single-family homes. Permits-issued for multi-unit projects can be volatile. In April, multi-unit permits are down 3.7 percent to 490,000 month-over-month and up 2.9 percent year-over-year.
New home construction is facing several challenges. Although plunging confidence does not necessarily mean consumers won't consider buying a newly built home, it does mean some will hesitate until fears about an economic downturn and/or job losses have eased. With many consumers on the fence about buying a new home, homebuilders will not start homes on speculation. Also, supplies of existing units are providing competition to homebuilders' projects, especially for single-family units. Some starts will be delayed due to tariffs introducing uncertainty about the cost of materials. Skilled labor costs are also a consideration. Finally, mortgage rates remain uncomfortably close to the 7 percent-mark, a level that discourages interest rate sensitive homebuyers as eating too far into home affordability.
The April month-over-month increase is entirely due to a rise in multi-unit home starts. The level is up 10.7 percent to 434,000 in April from March and jumps 30.7 percent compared to a year ago. Starts of single-family homes are down 2.1 percent to 927,000 in April from March and off 12.0 percent from 1.053 million a year ago. Homebuilders have seen falling buyer traffic for new single-family units and are less willing to build while mortgage rates remain elevated and materials costs and availability unsettled. When single-family homes are less affordable, the market for multi-unit homes is often better.
Permits-issued in April are down 4.7 percent to 1.412 million and below the consensus of 1.450 million in the Econoday survey of forecasters. Permits-issued are down 3.2 percent from 1.459 million a year ago. Fewer permits mean fewer projects being started in the near future.
Permits-issued for single-family homes are down 5.1 percent to 922,000 in April from March, and 6.2 percent lower than 1.459 million a year ago. This points to further weakening in construction of new single-family homes. Permits-issued for multi-unit projects can be volatile. In April, multi-unit permits are down 3.7 percent to 490,000 month-over-month and up 2.9 percent year-over-year.
Market Consensus Before Announcement
Starts are expected marginally better at 1.362 million units in April versus 1.324 million in March.
Definition
Housing starts measure the initial construction of single-family and multi-family units on a monthly basis. Data on permits provide indications of future construction. A housing start is registered at the start of construction of a new building intended primarily as a residential building. The start of construction is defined as the beginning of excavation of the foundation for the building.
Description
Two words: Ripple Effect. This narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as housing starts, investors can gain specific investment ideas as well as broad guidance for managing a portfolio.
Home builders usually don't start a house unless they are fairly confident it will sell upon or before its completion. Changes in the rate of housing starts tell us a lot about demand for homes and the outlook for the construction industry. Furthermore, each time a new home is started, construction employment rises, and income will be pumped back into the economy. Once the home is sold, it generates revenues for the home builder and a myriad of consumption opportunities for the buyer. Refrigerators, washers and dryers, furniture, and landscaping are just a few things new home buyers might spend money on, so the economic"ripple effect" can be substantial especially when you think of it in terms of more than a hundred thousand new households around the country doing this every month.
Since the economic backdrop is the most pervasive influence on financial markets, housing starts have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the housing starts data carry valuable clues for the stocks of home builders, mortgage lenders, and home furnishings companies. Commodity prices such as lumber are also very sensitive to housing industry trends.
Importance
The housing starts report is the most closely followed report on the housing sector. Housing starts reflect the commitment of builders to new construction activity. Purchases of household furnishings and appliances quickly follow.
Interpretation
The bond market will rally when housing starts decrease, but bond prices will fall when housing starts post healthy gains. A strong housing market is bullish for the stock market because the ripple effect of housing to consumer durable purchases spurs corporate profits. In turn, low interest rates encourage housing construction.
The level as well as changes in housing starts reveals residential construction trends. Housing starts are subject to substantial monthly volatility, especially during winter months. It takes several months to establish a trend. Thus, it is useful to look at a 5-month moving average (centered) of housing starts.
It is useful to examine the trends in construction activity for single homes and multi-family units separately because they can deviate significantly. Single-family home-building is larger and less volatile than multi-family construction. It is more sensitive to interest rate changes and less speculative in nature. The construction of multi-family units can be substantially influenced by changes in the tax code and speculative real estate investors.
Housing construction varies by region as well. The regions of the United States do not all follow exactly the same economic patterns because industry concentration varies in the four major regions of the country. The regional dispersion can mask underlying trends. The total level of housing construction as well as the regional distribution of housing construction is important.
Housing permits are released together with housing starts every month and are considered a leading indicator of starts. In reality, housing permits and starts typically move in tandem each month. However, there are some exceptions. For instance, if permits are issued late in the month, and weather does not permit immediate excavation, then permits might lead starts. For the most part, though, permits are not a good predictor of future housing starts. Incidentally, housing permits (but not starts) are one of the ten components of the index of leading indicators compiled by The Conference Board.
Home builders usually don't start a house unless they are fairly confident it will sell upon or before its completion. Changes in the rate of housing starts tell us a lot about demand for homes and the outlook for the construction industry. Furthermore, each time a new home is started, construction employment rises, and income will be pumped back into the economy. Once the home is sold, it generates revenues for the home builder and a myriad of consumption opportunities for the buyer. Refrigerators, washers and dryers, furniture, and landscaping are just a few things new home buyers might spend money on, so the economic"ripple effect" can be substantial especially when you think of it in terms of more than a hundred thousand new households around the country doing this every month.
Since the economic backdrop is the most pervasive influence on financial markets, housing starts have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the housing starts data carry valuable clues for the stocks of home builders, mortgage lenders, and home furnishings companies. Commodity prices such as lumber are also very sensitive to housing industry trends.
Importance
The housing starts report is the most closely followed report on the housing sector. Housing starts reflect the commitment of builders to new construction activity. Purchases of household furnishings and appliances quickly follow.
Interpretation
The bond market will rally when housing starts decrease, but bond prices will fall when housing starts post healthy gains. A strong housing market is bullish for the stock market because the ripple effect of housing to consumer durable purchases spurs corporate profits. In turn, low interest rates encourage housing construction.
The level as well as changes in housing starts reveals residential construction trends. Housing starts are subject to substantial monthly volatility, especially during winter months. It takes several months to establish a trend. Thus, it is useful to look at a 5-month moving average (centered) of housing starts.
It is useful to examine the trends in construction activity for single homes and multi-family units separately because they can deviate significantly. Single-family home-building is larger and less volatile than multi-family construction. It is more sensitive to interest rate changes and less speculative in nature. The construction of multi-family units can be substantially influenced by changes in the tax code and speculative real estate investors.
Housing construction varies by region as well. The regions of the United States do not all follow exactly the same economic patterns because industry concentration varies in the four major regions of the country. The regional dispersion can mask underlying trends. The total level of housing construction as well as the regional distribution of housing construction is important.
Housing permits are released together with housing starts every month and are considered a leading indicator of starts. In reality, housing permits and starts typically move in tandem each month. However, there are some exceptions. For instance, if permits are issued late in the month, and weather does not permit immediate excavation, then permits might lead starts. For the most part, though, permits are not a good predictor of future housing starts. Incidentally, housing permits (but not starts) are one of the ten components of the index of leading indicators compiled by The Conference Board.
