Homebuilders continue to be bullish on the American housing market as housing permits remained above 1.7 million for the fifth straight month, coming in at 1.76 million in April, according to government data released Tuesday.
We expected permits to remain strong as they are often a result of homebuilder confidence, which also held in April; the National Association of Homebuilders index came in at 83 last month. A reading above 50 is considered positive.
But housing starts slumped in April, dragged down by the soaring cost of lumber and other materials. Housing starts slowed to 1.569 million, representing a 9.5% month-over-month decline.
The lagging starts illustrate the significant challenges homebuilders are having with both materials and labor. Building materials are scarce as global supply chains are still disrupted because of the COVID-19 pandemic and resulting lockdowns.
The lack of building materials is not only disrupting housing starts, but it is also driving up costs. In addition, labor is in short supply. While there are still millions of unemployed Americans, there are not enough construction workers to meet builders’ needs.
The takeaway
Housing has been the consistent bright spot leading the economy back to full strength, but even this industry is not immune to the supply chain and labor disruptions caused by the pandemic.
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