Construction of new homes in the U.S. slowed by much more than expected in April as homebuilders held back on projects because prices of materials and labor have been rising rapidly.
Private homes were started at a seasonally adjusted, annualized rate of 1.569, a 9.5 percent decline from March, Commerce Department showed Tuesday. Economists had expected a rate of 1.705 million.
The decline was even sharper in the single-family home market, where the housing shortage is most acutely felt. Single-family housing starts in April fell to a rate of 1,087,000, 13.4 percent below the March rate.
The annual declines are now not useful measures of the health of the market because they reflect a near shutdown of construction in the spring of 2020 due to pandemic lockdowns. Compared with last April, housing starts are up 69 percent.
Single‐family authorizations to building homes in April fell to a rate of 1,149,000, 3.8 percent below the revised March figure. That indicates that the shortage of housing could continue in the months ahead, a promising development for home-sellers hoping prices will continue to rise or remain high but bad news for those looking to buy a first home.
“Single-family starts in April dropped more than 13% compared to last month, but permits to build single-family homes saw a smaller decline. 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,” said Mortgage Bankers Association chief economist Mike Fratantoni.
Demand for single-family houses soared last year in the wake of the pandemic and lockdowns, as many Americans decided to move from city centers in favor of suburbs. This has continued this year and represents a historic shift in the preferences of American families. Analysts believe it has been driven by a desire for more private living space, plans to work from home and commute less, and rising crime and anti-police sentiment in cities. As well, the shutdowns of amenities that formerly attracted families and younger workers to cities—such as theaters, bars, restaurants, museums, music and comedy venues—likely played a role in encouraging migration from the cities.
Prices of lumber have risen sharply in recent months, largely due to demand for housing and home improvement. In fact, current lumber prices are now cheaper than futures, a rare phenomenon called “backwardation.” Other materials, including copper, are also pricier and many builders have complained that they are having trouble finding workers.