Construction of new US homes dipped in April to its slowest pace in five months, a second consecutive decrease, the Commerce Department said Tuesday.
Analysts had instead been expecting an uptick in the pace of construction after March, when a winter storm in the Northeast likely held down activity among homebuilders.
Industry observers say supply has not kept pace with demand, with the current US economy producing an exceedingly tight market as rising wages and steady job creation drive up prices.
Analysts point to the high cost of construction, demand for rentals and the large share of suitable housing held by investment firms as reasons for the lack of supply.
Total housing starts were at a seasonally adjusted annual rate of 1.172 million, 2.6 percent below March’s downward-revised figure and the slowest expansion since November.
A consensus forecast among analysts had instead called for a 1.8 percent increase.
In the Northeast, construction dove 37.3 percent, but this reading can be volatile.
The April rate was still a modest 0.7 percent above April of 2016.
Lawrence Yun, chief economist at the National Association of Realtors, said the continuing slow pace of construction was bad news for would-be homebuyers, pushing prices and rents up faster than wage growth and inflation.
“This continued, slow pace of construction of new homes is a major bottleneck to a faster economic and housing recovery,” Yun said in a statement.
But Ian Shepherdson of Pantheon Macroeconomics said much of April’s decline was “probably not as bad as it looks,” as it was in part driven by a 9.2 percent monthly drop in multi-family housing starts.
“The recent numbers, then, look suspiciously like the start of a downward trend but none of the other recent housing data support that conclusion,” he said in a client note.
“Mortgage demand appears to be rising and homebuilders are very bullish.”
But building permits, which are a sign of future construction, also fell below analyst expectations at an annual rate of 1.229 million, down 2.5 percent from the prior month — still a solid 5.7 percent above April of last year.
A consensus forecast had instead called for a slight monthly increase of 0.4 percent.
For permits, buildings with five or more apartments rose for the second straight month, adding 1.5 percent to an annual rate of 403,000 — suggesting rentals may still be a driver of construction.