US homebuilding saw stronger than expected activity in April with a 5.7% rise in housing starts, with increases in both single-family and multi-family housing units. Data for the month before was also revised upward.
- US housing starts rose 5.7% to 1.235 million units vs 1.205 million expected last month with gains in both categories.
- Declining mortgage rates are believed to be a driving factor in the positive housing market activity.
- Data for March was revised upward, rising to a pace of 1.168 million units instead of dropping to 1.139 million units as initially reported.
Building permits, an indicator of future activity, rose 0.6% to a rate of 1.296 million units for April after declining for three months in a row. Single-family housing permits dropped for the fifth straight month, which may point to another cooldown in homebuilding on the horizon.
The rate of 30-year fixed rate mortgages dropped to 4.10% interest after peaking at 4.94% in November. The high interest rates were a major factor impacting affordability for would-be buyers. Decreasing mortgage rates are a result of the Federal Reserve lifting its three-year monetary policy tightening campaign.
A survey on Wednesday showed increased homebuilder confidence which hit a 7-month high in May, although labor and lot shortages continue to stand in the way of market growth, as does rising material costs. The housing market has been struggling since last year with a 2.8% contraction in homebuilding investment in Q1 2019, the 5th quarterly decline in a row.
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Single-family homebuilding, the bulk of the housing market, rose 6.2% to 854,000 units in April. This category surged in the Midwest where favorable dry weather conditions may have aided groundbreaking after months of flooding. Single-family starts also rose in the Northeast and West, dropping in the South where the majority of homebuilding takes place.
In the more volatile category of multi-family homes which includes apartment complexes and condominiums, starts rose 4.7% to 381,000 units. Permits for single-family homes dropped 4.2% and permits for multi-family homes rose 8.9%.
The price of gold has fallen following the release of the report. Spot gold is now trading up 0.18% at $1,297.03/oz. Selling pressure may also be coming from the market reaction to strong reports from the labor market and the manufacturing industry released in conjunction with the housing starts report.