April 2024 Housing Starts: Builders Cautiously Scale Back New Home Construction As Expectations Shift
As the number of completed homes rises and uncertainty surrounds the trajectory of interest rates, builder confidence declined, leading many to reduce the initiation of new projects. However, despite this slowdown, single-family housing starts still maintain an almost 18% increase compared to last year’s pace. Conversely, construction on buildings with 5 or more units has dropped by nearly 33% compared to a year ago. This decline is largely attributed to the considerable number of apartment buildings already being completed, which has helped ease the growth of apartment rents.
According to Zillow, the slowdown in single-family housing starts could reflect a cautious outlook from builders largely due to higher than expected interest rates and relatively steadier housing demand during a time of year when acceleration is typically expected.
Resale inventory is also increasing. According to Zillow data, homes that sold went pending in just 13 days – unchanged from a month ago. While appropriately priced homes still sell fast, many expected the pace to increase. Total for sale inventory is now up 18% from this time last year.
The housing stock is growing and builders continue to add to the inventory count. In April, single-family home completions saw a 14% uptick from last year. With more homes coming on the market and no equally large uptick in housing sales, total for-sale housing inventory is higher than it was a year ago.
Last month, 25% of builders cut prices compared to 22% of builders a month ago, ending four months of consecutive declines in this metric according to the National Association of Home Builders. As mortgage rates increased, the use of incentives also ticked up. Meanwhile, the average price cut remains stable at 6%.
With mortgage rates falling back below 7%, demographic factors as well as rising inflation-adjusted incomes and wealth should continue to support housing demand in the months ahead.
