Implications:  Housing starts rebounded modestly in April after a steep drop in March but the details of the report were not favorable.  Looking at the big picture, homebuilding seems to be stuck in low gear, hovering around 2019 levels, as builders struggle with the most single-family inventory since 2009 along with high home prices and relatively high mortgage rates. Now, builders must also contend with the uncertainty of new tariffs and how they’ll affect their building costs. That struggle can be seen in the data, as single-family starts declined 2.1% to a nine-month low, and permits fell 5.1% to the lowest level in nearly two years.  April’s gain was entirely due to a 10.7% jump in the volatile multi-unit category.  In the past year, multi-family starts are up 30.7% while single-family starts are down 12.0%.  It appears that part of the reason why homebuilding has lagged is due to builders focusing on completing projects.  Home completions declined 5.9% in April but have been running hot since last year.  The 1.458 million completion rate in April outpaced starts and is the only month below a 1.5 million pace (our estimation of annual homes needed to keep up with population growth and scrappage) in the last twelve months.  With strong completion activity and tepid growth in starts, the total number of homes under construction continues to fall, down 14.3% in the past year.  That type of decline is usually associated with a housing bust, but we don’t see that happening.  With the brief exception of COVID, the US has consistently started too few homes almost every year since 2007.  As a result of the shortage of homes, we think housing is far from a bubble and expect housing prices to continue moderately higher in 2025 in spite of some broader economic headwinds.  In other recent housing news, the NAHB Housing Index (a measure of homebuilder sentiment) declined sharply to 34 in May from 40 in April.  Keep in mind a reading below 50 signals a greater number of builders view conditions as poor versus good.  On the trade front, import and export prices both rose 0.1% in April.  In the past year, import prices are up 0.1% while export prices are up 2.0%.

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