US Housing Starts, Building Permits Stall as Mortgage Rates Bite

By Jordan Yadoo

US new-home home construction slipped in April amid ongoing supply-side challenges and the steepest climb in mortgage rates in decades.

Residential starts decreased 0.2% last month to a 1.72 million annualized rate after a downwardly revised 1.73 million pace in the prior month, according to government data released Wednesday. The median estimate in a Bloomberg survey of economists called for a 1.76 million pace.

A contractor installs wall insulation in a home under construction in Park City, Utah. Photographer: George Frey/Bloomberg

Applications to build, a proxy for future construction, fell 3.2% to an annualized 1.82 million units.

Builders are contending with high material prices amid decades-high inflation, along with continued difficulty securing lots and labor. That, combined with concerns that the steep surge in borrowing costs will squeeze would-be buyers out of the market, pushed a measure of homebuilder sentiment this month to the lowest level since June 2020. 

The average for a 30-year loan rose to 5.3% last week, up from 2.94% a year prior and the highest since 2009, Freddie Mac data show. Still, signs suggest pressures may be softening somewhat on both supply and demand sides of the market amid the easing pandemic and rising rates, permitting firms to work through swollen backlogs.

Single-family starts fell 7.3% in April to an annualized pace of 1.1 million units as multifamily starts — which tend to be volatile and include apartment buildings and condominiums — rose 15.3%. 

The report showed the number of single-family homes authorized for construction but not yet started — a measure of backlogs — rose slightly to the highest level in over 15 years. Overall backlogs climbed to the highest since 1974.

The number of single-family properties under construction continued to rise as builders make some headway, reaching 815,000, the most since 2006. The total number of units that remain under construction advanced to a record.

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