For a day, at least, market participants can bask in some good news on housing. Builders shifted their focus to multi-family housing starts in April, helping push total housing starts up an astounding 8.2 percent compared to a revised March total, the Commerce Department said Friday morning. Privately-owned housing starts registered a seasonally-adjusted annual rate of 1.032 million last month, up from a rate of 954,000 in March. The April total far surpassed the 939,000 that economists had predicted, MarketWatch reported, and was the third increase in the past four months. That number, however, doesn’t necessarily signal returning health to the U.S. residential housing market: single-family housing starts hit their lowest level since January 1991, registering an annual rate of 692,000 in April. That rate was 1.7 percent below March’s figure, according to the report. The strong overall reading for April is certain to bolster the arguments of those who have suggested recently that the housing market has hit bottom; critics, however, will suggest that increasing construction starts is the last thing an over-supplied housing market needs. Via Bloomberg:
“You cannot take the headline starts number seriously because of the increase in the multifamily number,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York, who had the closest estimate in a Bloomberg News survey. “The trends are horrific” because “why would you spend money to buy a depreciating asset?” he said.
Yes, multi-family housing is dwarfed by the size of the single-family market; but there is some good news buried in the report. First of all, the jump in apartment starts is something that many housing economists have said is much needed; the idea that the nation’s housing supply skewed far too heavily towards single-family construction during the recent housing boom is something that many have argued recently is now hurting consumers, who are finding their rental options limited. A recent study by Harvard University’s Joint Center for Housing Studies suggested that the nation’s housing supply was “imbalanced” by a lack of affordable rental housing. If so, news that multi-family starts are surging should come as at least some ray of good news. Permits, an indicator of future building activity, jumped 4.9 percent in April, driven by a 4.0 percent jump in single-family authorizations — the first jump in single-family permits in over one year. For those that see inventory as critical to housing’s recovery, the jump could mean future bad news: permit activity often presages future starts, which serve to lead completions, in a general sense. “The data reads like builders can only hold back for so long, and are now looking to start building up inventory again,” said one source, an analyst who asked not to be named. “That’s exactly what the market doesn’t need right now.” Completions, reflecting dismal single family starts over the past few months, dropped 16 percent in April; single-family completions fell 13 percent to a seasonally-adjusted annual rate of 13.0 percent, the Commerce Department said. Read the full report on new residential construction here.