Builders lack ‘conviction’ amid high costs, consumer caution 

While April was a solid month for the construction of apartments and other multifamily builds, new data indicates that builders have continued to put the brakes on single-family home projects.

What the latest data shows: Permits, starts and completions were all down for single-family homes in April compared to one year before, according to the U.S. Census Bureau.

Single-family housing starts were particularly sluggish, down 9% month-over-month and down 2.4% year-over-year for an annualized rate of 930,000. Federal government data also revealed 7% year-over-year declines in the numbers of homes under construction and homes completed.

Overall home construction activity was a mixed bag, with starts up but permits and completions down. This was due to an uptick in apartment construction, with starts for multifamily projects jumping 22.3% year-over-year and completions up 6.4%. It's a sign that builders have serious uncertainties about single-family home building, according to Joel Berner, senior economist at Realtor.com.

"Given the pressures on builders to offer incentives and price reductions on single family homes at the same time that their costs are growing due to tariffs and the high price of oil, it's unsurprising to see them pivot more resources toward bigger projects with more profit margin," Berner said.

Month-to-month single-family home construction data has largely flattened out after declining through much of last year, noted First American Deputy Chief Economist Odeta Kushi, though completions continue to steadily decline.

"Builders are still building, but they are doing so carefully, selectively, and without much conviction," Kushi said.

Small rise in builder confidence: Builder sentiment has improved slightly but remains at a low level. The National Association of Home Builders' Housing Market Index (HMI) was at 37 in May, up three points from April. It's been more than two years since the index hit 50 on its 1-100 scale.

Builders in the Midwest were the most optimistic with an index score of 43, followed by builders in the Northeast (42), in the South (35) and in the West (28).

The association's index gauging current traffic saw a three-point uptick but remained low at 25. However, the survey did show optimism for the future, with the index measuring future sales increasing three points to 45 and the index gauging current sale conditions rising three points to 40.

'Builders expected more' this spring: Consumers have also pressed the pause button on new homes, with 70% of builders saying the April market was slower than they anticipated, according to a market update from Zonda. Prices were up 3.9% year-over-year for high-end homes but fell in other segments, according to the report, which found that entry-level home prices fell 3% to $318,040.

"Builders expected more out of this year's spring selling season, but macroeconomic headwinds got in the way," said Ali Wolf, chief economist for Zonda and NewHomeSource. "Higher-than-expected mortgage rates, rising gas prices, incentive fatigue, and broader economic uncertainty have combined to hold sales flat."