April Housing Starts: Now What?

• April housing starts fell 30.2% from March and 29.7% from a year ago, to 891,000 (SAAR), according to the U.S. Census Bureau.
• Housing permits were down 20.8% in April from March, and down 19.2% year-over-year.
• Home completions fell 8.1% from March and 11.8% from last year.

The monumental decline in home construction activity in April was widely expected, but the decline is breathtaking nevertheless — the monthly decline in housing starts was easily the largest on record. But with last month now officially in the books, the million-dollar question is what happens next? There are any number of reasonable questions to be asked around buyers' willingness and ability to shop for homes in this environment, and an equal lack of reasonable answers. But while builder confidence plummeted in the early days of the crisis, it has slowly begun to climb back as builders assess a market that may not look as bad to them as it first seemed. Even in a market in which many buyers have been sidelined, the supply of homes for sale remains woefully low – and the idea of a brand new, never-lived-in home may prove extra alluring these days to safety-conscious buyers that can afford the premium on new construction. And mortgage interest rates sitting at near-record lows could make that somewhat larger price tag a bit easier to swallow for certain buyers. Residential construction has been deemed an essential service in many areas, allowing builders to keep projects going and be ready to meet demand once it comes back more fully. A quick return to anything close to "normal" is a ways off, but with other housing metrics indicating the worst may be behind us, builders are already looking to do their part to address the ongoing inventory shortage and capitalize on relatively forgiving homebuying conditions.

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