TRD Insights: Resi construction plunges in April

Unit authorizations dropped 21 percent from March

New York Insights /
May.May 21, 2020 10:30 AM
The coronavirus pandemic’s impact on the residential construction industry was initially blurry, largely because the data reflected only two weeks of its onset.

But now April’s residential new construction census figures are in. It’s not a pretty picture.

Seasonally adjusted authorizations of single- and multifamily units last month fell to 1,074,000, a 21 percent drop from their March level. Meanwhile, seasonally adjusted housing starts dropped to 891,000 units, down 31 percent from March. Looking back a year, both of these metrics dropped by at least 19 percent from their levels last April.

Broadly, single-family construction suffered more than multifamily. About 670,000 single-family units were authorized by building permits in April, down 24 percent from their March level of 884,000. Similarly, single-family housing starts dropped 25 percent to 650,000 from their March level of 871,000.

The results for multifamily construction were mixed. Multifamily units authorized by building permits dropped 12 percent to 373,000 from their March level of 426,000, while multifamily unit starts dropped 40 percent to 234,000 housing units from their March level of 392,000.

The comparatively muted decrease in unit authorizations for multifamily properties matches market sentiment on multifamily’s prospects long term. Some ratings houses expect multifamily real estate to weather the pandemic better than different kinds of real estate, while others warn of higher loan default risk for apartments with low-income and moderate-income tenants.

New construction in April dropped in all regions of the United States, but the biggest plunge was in the Northeast, where governors announced and extended bans on all nonessential construction. Homebuilder confidence in the Northeast single-family market in April approached record lows, according to the National Association of Homebuilders’ Housing Market Index.

Still, this month’s data is incomplete. Census statistics on the month-over-month change in housing completions had margins of error that included zero, which means it’s possible there was no change in the number of housing completions.


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