New residential construction activity in the U.S. slowed during April, particularly for single-family homes, according to data released on Thursday, May 21 from the Census Bureau.
Single-family housing starts were down 9 percent from March and down 2.4 percent year over year. Building permits for single-family homes were down 2.6 percent from March as well.
Maor Greenberg, co-founder and CEO of Spacial, an AI-powered structural engineering platform for residential construction and a 19-year veteran of the construction and real estate industries, shared the following comments about the latest data.
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The most important figure: “Single-family starts are the signal. Single-family starts dropped 9 percent in one month. The total number of starts looked fine because multifamily starts held it up. But what it really means is there are fewer ground-breaks per community, longer pauses between phase releases and more attention being paid to the specs on homes already standing, rather than to the next house. Builders aren’t retreating, they’re picking their shots.”
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Housing Starts vs. Permits: “When starts are higher than permits, builders are finishing entitled work without restocking behind them. In April, starts came down to 1.465 million. Single-family permits dropped, again, to 872,000. The total permit number increased because of multi-family projects, but the single-family pipeline keeps shrinking. The numbers show fewer single-family starts through the back half of the year. Completions hold up because they are based on entitlements from 12 to 18 months ago.”
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Builders Grappling With Affordability: “For land, deals that were underwritten six months ago would no longer be underwritten. The new lot-purchase agreement terms are tight. Builders are holding back on ground-breaks. Spec counts are coming down. Margins are down. This combination favors operators who can carry land longer and absorb margin compression. Smaller builders don’t have room to make these moves.”
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What It All Means: “Supply is not on the way. Ground-break numbers fell. Fewer single-family homes are being built, and it will not reverse within a single quarter. Before, the question was whether the buyer could afford the payment. Now the question is whether the builder can deliver the house at a price without giving up too much margin. Resale is locked up because of high interest rates. The supply path will continue to be tight.”
