New-home construction in April fell to the lowest level in five months, but applications for building permits soared to a five-year high, according to Commerce Department data released Thursday.
The data show that the housing recovery could continue to be marked by a low inventory of homes over the near term, analysts said. Home sales and prices have rebounded significantly over the past year, and mortgage rates remain near historic lows — though rates have shown a slight uptick over the past two weeks.
But buyers have struggled to find enough available homes, which analysts have partially blamed on low construction levels.
April’s 16.5 percent drop in housing starts follows a milestone in March, when builders broke ground on more than 1 million homes, the highest level since June 2008. April’s decline was concentrated in multifamily home construction, which includes apartments and condominiums. April’s housing starts, which reached 853,000, were up 13.1 percent compared with the same month last year.
Construction remains below pre-crisis levels, but the jump in permit applications shows that April’s decline might be temporary, said Jed Kolko, chief economist at real estate research firm Trulia. With so many permits issued last month, construction is likely to pick up next month, he said.
“Construction is responding to increasing home prices,” Kolko said. Higher prices are “a sign for builders that there is demand for new homes.”
New homes make up a smaller share of the housing inventory but are still significant, Kolko said. The number of units under construction is growing, which eventually will help increase inventory, he said.