The Department of Housing and Urban Development (HUD) along with the U.S. Census Bureau released their April New Residential Construction Activity Report on Tuesday. According to the report, new privately-owned residential construction permits fell 2.5 percent between March and April, falling from 1,260,000 to 1,229,000.
Privately owned housing starts fell as well, by 2.6 percent, falling from 1,203,000 in March to 1,172,000 in April. Housing completions saw a more dramatic fall of -8.6 percent. However, HUD notes that completions are still 15.1 percent higher than the previous year.
First American Chief Economist Mark Fleming stated that this report “signals further supply shortages in the housing market,” despite the year-over-year growth
“Permits, Starts and Completions increased 5.7 percent, barely increased 0.7 percent and increased 15.1 percent respectively compared to a year ago,” said Fleming. “The lack of inventory of homes for sale is one of the most pressing challenges in the housing market today, and new homes are the source of supply that increases the total stock of housing to meet our nation’s growing demand. Yet, many builders have noted the challenge of increasing production with constrained labor supply.”
Fleming notes that the home construction industry does not lend itself well to automation like other industries do. “Home building still requires manual labor as a key input into the production process,” he said. “While the need for manual labor may be changing or declining in other industries, it’s very hard to build a home without construction workers.”
According to Fleming, residential construction jobs will have to grow to increase the pace of housing starts.
“Until the supply of residential construction labor increases and housing starts pick up the pace, expect continued supply shortages in many housing markets,” Fleming continued, “Good for prices and homeowners, but an affordability challenge for the Millennial first-time homebuyer.”