Home starts up in April but down year over year due to multi-family drop

Updated May 26, 2016

Home construction site prepU.S. home starts grew by 6.6 percent during April on gains from both single- and multi-family units, but the year-over-year count is down due to starts on apartments dropping from the April 2015 figure.

Total starts increased in April to a seasonally-adjusted annual rate of 1.172 million. That figure is down 1.7 percent from the April 2015 figure.

Single-family starts rose 3.3 percent from the March figure and are up 4.3 percent from the year-ago figure at a rate of 778,000.

The drop is largely due to a year-over-year decrease in apartment starts of 12.9 percent to 373,000 units. Apartment starts were up 10.7 percent from the March figure and rather than providing evidence of a weakness in the market, the down month is more of an example of how up-and-down multi-family starts were last year.

In February 2015, starts on multi-family units dropped from from a seasonally-adjusted rate of 383,000 to 294,000. By April they were back up to a rate of 428,000 before dropping back down to 360,000 in May and jumping back up to a rate of 513,000 in June. Things calmed down considerably for the remainder of 2015 and the rate has hovered in the high 300ks to low 400ks since then.

Building permits, a good barometer of how the homebuilding industry is trending, rose 3.6 percent during April to a rate of 1.116 million. Permits are 5.3 percent below the year-ago estimate.

“Though housing construction data is relatively flat for the beginning of 2016, we anticipate a ramping up of housing production during the rest of the year, given a strengthening job market, low mortgage interest rates and favorable demographics,” said National Association of Home Builders chief economist Robert Dietz in a prepared statement.

For the fourth consecutive month, sentiment toward the housing market was unchanged in April at a reading of 58, according to the NAHB/Wells Fargo Housing Market Index. Any reading above a 50 indicates most home builders believe market conditions are good.

“However,” noted NAHB chairman Ed Brady, “builders are facing an increasing number of regulations and lot supply constraints.”

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“The fact that future sales expectations rose slightly this month shows that builders are confident that the market will continue to strengthen,” added Dietz.