US Homebuilding Plunged to Record Lows in April

U.S. homebuilding suffered another blow, tumbling to a five-year low last April, as the economy sinks further, and the unemployment rate worsens.

April has shown the worst numbers so far in the U.S. homebuilding and unemployment rate since the pandemic forced the majority of the economy to shut down. But hopes are still high that the numbers will improve once the economy starts to reopen gradually.

Housing starts

The May 19, 2020 report from the Commerce Department said that housing starts in April declined 30.2 percent to 891,000 units at a seasonally adjusted annual rate. This is 29.7 percent below the rate of 1,267,000 units for the same period last year and the lowest level it has been since early 2015.

Single-family housing starts in April is at 25.4 percent or 650,000 units--that's below the March revised rate of 871,000. The April forecast by economists, as polled by Reuters stated that housing starts would fall to a rate of 927,000 units.

Housing starts for all four regions fell led by the Northeast region, dropping 43.6 percent, followed by the West region, down by 43.4 percent. South and Midwest fell 26.0 percent and 14.9 percent, respectively.

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Housing starts refers to the number of home construction projects that commences during a particular month. Housing starts are a key indicator of the U.S. economy as it reflects people's ability to purchase new homes.

The U.S. Commerce Department releases statistics on housing starts every 17th of each month. Data is divided into Single-family homes, townhomes and condominiums, multi-family structures with five or more units.

Building permits

Home construction building permits fell 20.8 percent to a seasonally adjusted annual rate of 1,074,000, lower than the revised figure of 1,356,000 in March, and 19.2 percent below the rate of 1,330,000 a year ago. Single-family building permits also fell to a rate of 669,000 or 24.3 percent lower than the March revised figure of 884,000.

The Northeast region had the biggest drop, with 45.5 percent followed by the West region with a decline of 28.0 percent. The Midwest and South regions declined by 16.1 percent and 14.7 percent, respectively.

Housing completion dropped as well by 8.1 percent to 1,176,000 million in April, while houses under construction plunged 1.7 percent to 1,195,000 million units.

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The U.S. economy recorded a total of 20.5 million job losses and an increase in unemployment of 14.7 percent in April--the largest recorded decline since data was tracked in 1939, according to the Bureau of Labor Statistics.

Despite the rise in unemployment and homebuilding downturn, builder confidence has recovered after it suffered a decline in April, the largest recorded monthly decline. The NAHB/Wells Fargo Housing Market Index or HMI was up by 7 points to 37 in May.

Building permits refer to the type of government-granted permission or authorization given by other regulatory bodies before a new building can be constructed. The U.S. Census Bureau surveys and publishes reports of buildings permits for new housing units.