Builders are facing challenges including the cost of labor and materials but they are still pushing ahead with building due to increasing demand from younger buyers.
Housing starts data released Thursday by the HUD and Commerce Dept. shows a 5.7% increase to a seasonally adjusted annual rate of 1.24 million units in April compared to an upwardly-revised March figure.
Single-family starts were up 6.2% to 854,000 units while the multifamily sector increased 4.7% to a 381,000 pace.
Permit issuance edged up 0.6% to a 1.3 million unit annualized rate in April with single-family permits down 4.2% to 782,00, the lowest level since October 2016. Multifamily permits increased 8.9% to 514,000.
“Though an overall encouraging report for the month of April, the soft permit numbers for single-family housing indicate concerns about housing affordability and construction costs,” said NAHB Chief Economist Robert Dietz. “Builders continue to focus on managing home construction costs as they try to meet growing housing demand. NAHB analysis of first quarter permit data show growth in more affordable exurban locations.”
Older homeowners not downsizing
Millennial demand for new homes is being driven by them reaching an age where they want to be homeowners but also less downsizing by the previous generations, especially Baby Boomers.
First American’s Deputy Chief Economist Odeta Kushi says the demographics could support 1.2 million single-family starts rather than the 854,000 month-over-month gain posted in April.
“Both the number of building permits issued and housing starts increased to three-month highs, indicating that home builders are pushing through new construction projects despite supply-side headwinds, such as a shortage of labor, costly regulations, and a shortage of buildable lots,” she said. “The positive report supports a brighter outlook for the housing sector in 2019, as demographics and low mortgage rates continue to support demand.”
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