Home construction slowed for the second straight month in April but builders remain optimistic in the housing market’s expansion.
Housing starts dropped 2.6 percent to 1.17 million units after a 6.6 percent decrease in March, left home building at its lowest point since last November., pushing down the Commerce Department reported on Tuesday.
"Despite this minor pull back, builders are optimistic about market conditions and expect more consumer activity in the months ahead," said Granger MacDonald, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Kerrville, Texas.
A drop in multifamily production, which fell 9.2 percent to a seasonally adjusted annual rate of 337,000 units, weighed on construction.
"All three of the major new construction indictors — permits, starts, and completions — fell from last month," said Ralph McLaughlin, chief economist at Trulia.
"The silver lining for new homebuyers is that most of the construction pullback is in the multifamily sector, where economists have been expecting an eventual slowdown given the charge of multifamily units coming out of the recession," McLaughlin said.
"It looks like the retreat is finally here."
Despite the slight pause, single-family building is up 7 percent so far this year, according to NAHB.
In April, construction of single-family homes ticked up slightly by 0.4 percent to an annual rate of 835,000 units.
"The April report falls in line with our forecast for continued, gradual strengthening of the single-family sector throughout the year,” said Robert Dietz, NAHB’s chief economist.
On Monday, NAHB reported that builder confidence rose to 70 in May, an increase of two points from last month. Any reading over 50 indicated positive sentiment.
Gus Faucher, chief economist wth PNC, said the "trend in homebuilding is positive."
"A decade after the housing bust started, households are becoming more enthusiastic about homeownership," he said.
"With an improving economy, especially a job market near full employment, good affordability, low mortgage rates, and easing access to credit, households are moving away from renting and towards buying, supporting residential construction, especially of single-family homes."
Regionally in April, combined single- and multi-family housing production rose 19.4 percent in the Midwest and 9.1 percent in the West.
Starts fell by 3.4 percent in the South and 29.2 percent in the Northeast.
Overall, permits to build dropped 2.5 percent in April to a seasonally adjusted annual rate of 1.23 million units.
Multi-family permits inched up 1.4 percent to 440,000 units while single-family permits fell 6.2 percent to 789,000.
Regionally, permits increased 8.7 percent in the West and 1 percent in the Midwest. Permits fell 7.4 percent in the South and 10.3 percent in the Northeast.