Housing starts dived downward in April, falling 12.8% compared to the previous month, to a new record low and a seasonally adjusted level of 458,000, according to data released today by the U.S. Census Bureau. On an annual basis, that qualifies as a 50.2% drop.
The drop was driven primarily by the volatile multifamily sector, where starts for buildings of five units and more dropped 42.2% to a seasonally adjusted pace of 78,000 last month. Starts for buildings with two to four units also declined 62.5% to a level of 12,000 units. Combined, the two represent a 46.1% reduction in multifamily activity last month, to 90,000 units.
"The market for multifamily homes is in a deep slump," observed Patrick Newport, U.S. economist for IHS Global Insight. "Multifamily starts and permits both fell to all-time lows in April. The recent drops have been mind-blowing. Multifamily starts averaged 380,000 over the first half of 2008; in June 2008, they jumped to a 423,000 annual rate. They have dropped steadily since, and [last month] plummeted to 90,000 units. This sharp decline is related to financing. Some builders are overwhelmed with debt. Others cannot find funding to finance projects with positive net present values."
In contrast, single-family starts picked up 2.8% on a monthly basis to a seasonally adjusted level of 368,000 units. On an annual basis, that figure represents a 45.6% slide, but this second monthly increase for single-family starts appears to be generating optimism in some industry watchers. Additionally, single-family permits showed a small gain in April, increasing 3.6% to a seasonally adjusted pace of 373,000 units. (That’s 42.3% below April 2008’s numbers.)
Such gains are important because permits are both a sign of future construction and economic activity.
"The market for single-family homes appears to have hit bottom--although it is too soon to make a call," Newport said. "Single-family permit--the key number in the report--increased 3.6% to an annual rate of 373,000 units, and it appears that January's 342,000 unit reading will mark the low point in this housing cycle."
A decline in multifamily permitting pushed overall permits down 3.3%, though, to a seasonally adjusted total to 494,000. That’s basically half the number of permits builders were pulling a year ago for single-family and multifamily projects.
Alison Rice is senior editor, online, at BUILDER magazine.