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U.S. housing construction cools as costs climb

Housing production fell in April due to the increased costs of building materials that have priced out potential home buyers. Overall housing starts decreased 9.5 per cent to a seasonally adjusted annual rate of 1.57 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The April reading of 1.57 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 13.4 per cent to a 1.09 million seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, increased 0.8 per cent to a 482,000 pace.

“Housing starts and permits posted a monthly decline in April, as escalating prices for lumber and other building materials price out some home buyers from an otherwise hot housing market,” said NAHB chairman Chuck Fowke, a custom home builder from Tampa, Fla. “Policymakers need to prioritize the U.S. supply chain for items like building materials to ensure builders can add the additional inventory the housing market desperately needs.”

“The decline in single-family permits indicates that builders are slowing construction activity as costs rise,” said NAHB chief economist Robert Dietz. “While housing starts were strong at the beginning of the year, due to home builders constructing homes that were sold pre-construction, higher costs and limited availability of building materials have now paused some projects.”

Overall permits increased 0.3 per cent to a 1.76 million unit annualized rate in April. Single-family permits decreased 3.8 per cent to a 1.15 million unit rate. Multifamily permits increased 8.9 per cent to a 611,000 pace.

Looking at regional permit data compared to the previous month, permits are 8.4 per cent higher in the Northeast, 9.9 per cent lower in the Midwest, 3.9 per cent higher in the South and 4.1 per cent lower in the West.

The number of single-family homes permitted but not started construction continued to increase in April, rising to 131,000 units. This is 47 per cent higher than a year ago, as building material cost increases and delays slow some home building.