COVID-19 has hit the housing market, to literally no one’s surprise. Housing starts plummeted 30.2% in April as our globe struggled with how to social distance and survive an economic shut down. Home building activity hit a five-year low, according to the U.S. Commerce Department.
Compared to April 2019, housing starts dipped 29.7% across all four regions, despite many states allowing builder activity to continue as “essential” during stay-at-home orders sidelined many. During the same period, permits for housing fell 21%.
Starts didn’t fall for lack of trying, rather supply chain interruptions that we suspect will continue into the summer during this adjustment phase of reopening the economy.
May will likely continue the trend of restricted building activity. Most economists expect a widespread contraction in the second quarter. Housing alone isn’t braced for impact, rather combining that with a hit to the gross domestic product (GDP) as consumer spending and business investment continue to retract.
One silver lining is that despite this negative news, new home construction didn’t decline nearly as sharply as various other sectors of the American economy, a hopeful sign for the market.
Further, on the “relatively low level of single family starts and completions,” the The Calculated Risk blog calls this period the “wide bottom,” as they forecast “following the recession, and now I expect some further increases in single family starts and completions once the crisis abates.”
So take a big deep breath and fake gasp at the fake shock you’re feeling about housing starts slowing in April. And get ready to do it again in four weeks about May, then again in June. We’re not at the bottom, nor are we nearing it, and the market is changing, but no one is surprised that as the global pandemic hits the global economy, there will be ripples throughout every sector.