Single-Family Home Construction Slows in April as Builders Grapple With Rising Rates

Construction activity on new single-family homes fell nationwide in April, the U.S. Census Bureau reported on Thursday.

Single-family housing starts in April were seasonally adjusted annual rate of 930,000 last month, down 9% from March, the Census Bureau and the U.S. Department of Housing and Urban Development reported. April's figure was down 2.4% from a year ago.

However, total housing starts increased, driven by a surge in multifamily construction. Multifamily starts tend to be more volatile, but were at 514,000 units annualized, up about 11.5% from last year.

Municipalities issued 1.44 million private housing permits in April, 5.8% above March's 1.36 million and essentially unchanged from a year ago. Single-family permit activity dipped, however, falling 2.6% from April to 895,000.

Construction starts took a dip in the beginning of the year but rebounded by March, as builders contended with inflation and higher costs of goods and labor. Still, builders report more confidence in the housing market this spring, according to data from the National Association of Homebuilders.

Market challenges

Realtor.com economist Joel Berner said the data reflects challenges builders face. While inflation and higher labor costs continue to rise, home prices are ticking downward. Builders are being forced to offer bigger incentives to move homes, cutting deeper into their margins.

That's left them hoping for more months of strong sales, before they figure out how to play this market. There's an option of cutting prices and hoping to sell more hopes. They could also hold out for more higher-quality sales.

"There's plenty of uncertainty with what will happen to prices in the housing market at large, where mortgage rates will go, and whether any relief from rising costs is on the horizon," Berner said. "I don't see this as a major pullback but definitely builders are acting with some trepidation."

Indeed, builders are reporting on the challenges they face in quarterly earnings calls this month. New Jersey-based builder Hovnanian Enterprises Inc., for instance, reported a significant shrink in margins for the first six months of its fiscal year, ending April 30.

Gross margins after cost of sales interest expense and land charges fell to 10.2% in the past six months, from 14.5% during the same time a year ago, the company said on a Thursday earnings report.

"We began our second quarter with encouraging sales momentum, but escalating geopolitical tensions, particularly the war in Iran, reignited inflation concerns and caused many homebuyers to hesitate," CEO Ara Hovnanian said. "While demand remained uneven, we stayed focused on managing pace, pricing, and costs."

Signs for 2026

To Berner, the relatively stronger performance of multifamily construction could portend it has a stronger year. He has more analysis of the numbers here.

Danushka Nanayakkara-Skillington, assistant vice president of forecasting and analysis at the National Association of Homebuilders, expects the slow single-family building trend to continue in 2026.

But it might not take place evenly, especially given the relatively stronger signs coming from the Midwest. That more affordable area continues to make headlines as its housing market outperforms the nation at large.

“Recent increases in the 10-year Treasury yield have driven mortgage rates higher, further reducing affordability and weakening demand for new homes," she said. "As a result, home building is likely to remain under pressure in the coming months, especially as higher diesel and gas prices continue to raise construction costs.”