Data released by the Census Bureau on Monday showed April housing starts and permits beat consensus estimates, with multi-family projects shouldering much of the upward surprise.
On a seasonally adjusted annual rate (SAAR) basis, housing starts were 1.465 million in April, topping the 1.41 million consensus. Although the SAAR reading was 3% below March, it represented the second strongest monthly rate in the past 12 months.
Multi-family starts on a SAAR basis rose 20% year-over-year and climbed 10% sequentially. By contrast, single-family starts fell 9% from March and were down 2% year-over-year.
Permits, another gauge of near-term construction activity, also outperformed estimates. Housing permits reached 1.442 million SAAR, above the 1.38 million consensus and up 6% versus March. Single-family permits dropped 3% month-over-month, while multi-family permits surged 22% from the prior month.
Looking at the non-seasonally adjusted (NSA) detail, total housing starts in April were 133,000, up 5% year-over-year. Regionally, the West posted a notable 47% year-over-year increase in starts. Meanwhile, the Southeast, Midwest and Northeast saw declines of 3%, 9% and 3% respectively.
April multi-family starts on an NSA basis grew 18% year-over-year and were up 20% year-to-date. The West stood out with a 170% year-over-year increase in multi-family starts, identified as the strongest individual month in roughly three years. Single-family starts on an NSA basis totaled 86,000, down 2% year-over-year but constituting the second highest monthly reading in nine months.
On an NSA basis, April housing permits were 131,000, essentially flat year-over-year. Single-family permits fell 6% versus the same month a year earlier, marking the sixteenth consecutive annual decline for single-family permits. Multi-family permits increased 12% year-over-year.
Completions data showed 116,000 units completed in April on an NSA basis, down 2% year-over-year. Single-family completions decreased 7% year-over-year, while multi-family completions rose 7% year-over-year, the first monthly gain for multi-family completions in more than a year.
Investment bank Baird, commenting on the report, said the sustainability of the improvement is uncertain. Baird pointed to higher interest rates and persistent inflation as risks that could weigh on the sector into the second half of the year. The firm said it continues to favor residential-focused equities that offer secular growth pathways, the potential for market share gains and opportunities for disciplined capital deployment.
In its residential coverage, Baird named GFF as its top pick and also highlighted JHX, SSD, TREX, 669-HK and TGLS among favored names.
Summary
April housing starts and permits exceeded expectations, driven primarily by stronger multi-family activity. Regional gains were led by the West, and while overall starts were near recent highs, single-family metrics generally softened. Baird flagged macro risks that could challenge the persistence of the improvement and reiterated preference for select residential equities.