Housing starts plummeted to a five-year low in April as builders paused activity amid the COVID-19 pandemic.
Starts on both multifamily and single-family units dropped 30%, the biggest monthly decline in six decades of records, to a seasonally adjusted annual rate of 891,000 in April, the lowest level since February 2015, the Commerce Department said in a report on Tuesday.
The number of single-family houses started by builders fell 25% to an annual pace of 650,000 units in April. Multifamily starts fell 40.5% to a rate of 241,000 units.
“Housing starts were horrible in April, but what wasn’t?” Wells Fargo economists said in a report. “April’s decline largely reflects plunges in building activity in large states, some of which did not deem home construction an essential business.”
Whether required by state stay-at-home orders or not, many homebuilders hit the “pause” button as the nation struggled to contain the worse pandemic in more than a century.
“Activity also pulled back even in states where homebuilding was deemed essential, as builders grew cautious amidst a nearly complete lull in demand as well as growing concerns about apartment tenant demand and the ability to collect rents,” the Wells Fargo economists said.
On April 29, the Commerce Department reported that America’s longest economic expansion had officially ended in the first quarter with a 4.8% contraction of GDP.
The second quarter will be worse, according to every major forecaster.
GDP probably will shrink a record 37%, Fannie Mae said last week. And, unemployment probably will spike to 18%, the forecast said. But, things should improve in the second half of the year, said Doug Duncan, Fannie Mae’s chief economist.
“We expect the contraction in the second quarter of 2020 to represent the floor of the sudden and historic drop in economic activity associated with the coronavirus,” Duncan said.