Tariff war also helped fuel drop in builder confidence to lowest level since December 2022
Single-family housing starts fell by 2.1% in the month of April, due in large part to continuing affordability challenges and tariff-caused building materials price increases. However, one economist does see reason for optimism over the coming months.
The report, released on Friday by the Commerce Department’s Census Bureau, showed declines in single-family housing starts, permits, and completions on a month-over-month basis.
Odeta Kushi, deputy chief economist at First American, said affordability issues led to the April declines.
“The April report was not a great one for single-family housing, with single-family starts, permits and completions all declining,” Kushi said. “The slower pace of single-family permits suggests a reduced rate of single-family groundbreaking in the upcoming months, due to higher inventory levels in key markets and ongoing challenges with costs and affordability.
“Consumers are feeling jittery and might need more than just a mortgage rate buydown to jump into the market.”
In April, there were 927,000 single-family housing starts compared with March’s 947,000. Overall, privately-owned housing starts were up 1.6% to 1.361 million, an increase from 1.339 million in March, but down 1.7% year over year. Buildings with five or more units drove the overall increase, with 420,000 reported in April.
While the overall housing starts increased in the month, the 1.361 million starts were lower than the consensus expectations of 1.364 million.
Builder confidence drops to lowest since December 2022
Privately-owned housing units authorized by building permits were reported at 1.41 million, down 4.7% from March’s 1.48 million. It was also a 3.2% drop year over year. Single-family permits showed a greater decline, as the 922,000 reported for April was down 5.1% from March.
The 1.41 million overall permits were below the consensus forecast of 1.45 million. Kushi said these numbers are also reflected in the National Association of Home Builders' Housing Market Index (HMI), released on Thursday.
“The decline in single-family home production aligns with souring builder sentiment. Builder sentiment in May dipped to the same level as in November 2023, equaling the lowest index value since December 2022,” Kushi said. “This growing pessimism was broad-based across all NAHB Housing Market Index (HMI) components.”
The decline in production and increased frustration among builders can be attributed to mortgage rate increases in April, Kushi said. This occurred after the “Liberation Day” tariffs the Trump administration announced early in April.
George Carrillo of Hispanic Construction Council sees cautious optimism in Fannie Mae’s forecast, noting rising home prices and originations—but warns trade volatility may disrupt progress. https://t.co/FbWAra7sob
— Mortgage Professional America Magazine (@MPAMagazineUS) May 12, 2025
“The growing pessimism is partially driven by the increase in mortgage rates in April, which impacts both builder and buyer financing costs,” Kushi said. “Residential construction costs are still more than 40 percent higher compared to pre-pandemic levels, and skilled labor shortages persist.
“Policy uncertainty also weighs heavily on builder sentiment, with 78% of builders reporting difficulties pricing their homes recently due to uncertainty around material prices, according to NAHB.”
Housing completions down, but room for optimism
Privately-owned housing completions also decreased in April. There was a total of 1.459 million completions in the month, down 5.9% from the March figure of 1.549 million.
More concerning is the year-over-year drop, as April 2025 saw a decrease of 12.3% from April 2024’s total of 1.662 million.
Single-family housing completions dropped 8% from March to April, going from 1.025 million in to 943,000 last month.
However, noted that the recent 90-day pause in the tariffs between China and the United States has helped calm the market’s volatility.
“There are reasons for cautious optimism as we approach the second half of the year,” Kushi said. “The long-term housing shortage, builders’ ability to offer incentives, and potentially less restrictive monetary policy could be tailwinds. The recent announcement that the United States and China will reduce tariffs for 90 days may offer temporary relief and brighten the outlook.”
There was more good news this week when the Mortgage Bankers Association (MBA) announced that mortgage applications had increased by 1.1% last week.
The HMI also shows some positive signs for potential homebuyers regarding housing affordability.
“Builders are responding to these challenges, with 34 percent of them cutting home prices in May, up from 29 percent in April, and the highest level since December 2023, according to the latest HMI survey results,” Kushi said.
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