The pace of U.S. home construction jumped in April to its highest level since November, led by a jump in starts on multifamily projects, showing builders returned to sites after freezing temperatures restrained work earlier this year.
Housing starts climbed 13.2 percent to a 1.07 million annualized rate following March’s 947,000 pace, the Commerce Department reported today in Washington. Starts exceeded all analysts’ forecasts, with the median estimate of 79 economists surveyed by Bloomberg calling for 980,000. Permits for future projects increased, a sign activity might accelerate in coming months.
An almost 40 percent increase in construction starts on multifamily projects such as condominiums and apartment buildings accounted for almost all of the April gain, as single-family activity was held back by declining affordability. Hiring gains may spur a rebound in residential real estate after unusually harsh weather held back construction at the start of the year.
“Single-family is still concerning, but multi-family is going full throttle,” said Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Alabama, who had forecast 1 million housing starts. “We’re seeing job growth pick up, income growth pick up, and now there’s talk of loosening up credit for home purchases,” and those “should contribute to a pick-up in single family activity.”
Another report showed consumer confidence slipped this month. The Thomson Reuters/University of Michigan preliminary sentiment index fell to 81.8 in May from 84.1 a month earlier.
Stocks were lower after the reports, with the Standard & Poor’s 500 Index dropping 0.2 percent to 1,866.47 as of 10:08 a.m. in New York. The yield on the benchmark 10-year note rose one basis point, or 0.01 percentage point, to 2.5 percent.
Estimates for starts in the Bloomberg survey ranged from 925,000 to 1.05 million.
Building permits climbed 8 percent to a 1.08 million annualized pace. They were projected to rise to 1.01 million, according to the Bloomberg survey median.
Multifamily construction starts jumped to a 423,000 annual rate from 303,000 in March, while work on single-family properties rose 0.8 percent to a 649,000 rate in April from 644,000 the prior month.
Home construction increased in every region, led by the Midwest, with a 42.1 percent increase. Starts jumped 28.7 percent in the Northeast, 11.1 percent in the West and 1.5 percent in the South.
Confidence among homebuilders dropped in May to the lowest level in a year, indicating the residential real estate market may be slow to recover after an unusually harsh winter, data showed yesterday.
The National Association of Home Builders/Wells Fargo builder sentiment gauge fell to 45 this month, the weakest since May 2013, from a revised 46 in April that was lower than initially reported, figures from the Washington-based group showed today. Readings less than 50 mean fewer respondents report good market conditions. The median forecast in a Bloomberg survey called for 49.
Borrowing costs, which climbed in the second half of 2013, are stabilizing. The average 30-year, fixed-rate mortgage was at a six-month low of 4.21 percent in the week ended May 8, according to data from Freddie Mac in McLean, Virginia. The average from July through December was 4.37 percent.
While increasing prices are hurting affordability for those getting into the market, they also help homeowners feel wealthier. Real estate data provider Zillow Inc. sees those prices keeping up their climb.
“For almost all of the country, home values are increasing,” Chief Executive Officer Spencer Rascoff said on a May 7 earnings call. “The rate of growth is slowing, but it’s still a very healthy housing market.”
The latest data from S&P/Case-Shiller in New York showed an index of property prices in 20 U.S. cities increased 12.9 percent from February 2013, the smallest advance since August, after a 13.2 percent gain in the year ended in January. March data are due for release May 27.
(An earlier version of this story corrected the regional breakdown of April housing starts.)