Housing starts rise in April; Drop in permits tells the real story, however

Summary

Permits point to further moderation ahead

Housing starts rose 1.6% in April, partially rebounding from the sharp fall registered in March. The total gain was the result of a jump in multifamily ground-breakings, which was more than enough to offset a slip in single-family starts.

Although the monthly bounce in overall starts is an encouraging sign that projects continued to move forward despite Liberation Day volatility, a surprisingly steep decline in building permits is the latest evidence that residential construction is slowing as builders contend with high mortgage rates, an elevated inventory-to-sales ratio and increased policy uncertainty.

The downdraft in permits is consistent with recent weakness in other forward-looking housing construction indicators, such as the NAHB Housing Market Index, which dropped notably in May. All told, we continue to expect residential construction to pull-back this year.

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