Instant Reaction: Housing Starts, May 16, 2024

Housing starts in April bounced back slightly after a large decline in the previous month. The latest monthly gain of 5.7%, following a 17% fall in March, was led by more activity in the South region. The total annualized rate of 1.36 million is insufficient overall. The country needs around 1.6 million or higher for a few years to truly bring about a balance in the housing sector.

On a positive note, albeit only for the short term, the completion of homes is rising due to past months' higher housing starts. The 1.62 million housing unit completions in April was the second-highest monthly figure in 15 years. Expect apartment vacancy rates to trend higher, rents to slow down, and more homebuyers able to buy newly constructed homes. However, given the recent declines in housing starts, home completions will steadily show declines in about six months.

The housing shortage is not going away. The laws of supply and demand tell us that home prices are on firm ground and could even reaccelerate in the future unless more is done to boost supply.