U.S. homebuilding dropped by the most on record in April and permits for future construction tumbled, underlining fears that the novel coronavirus crisis would lead to the deepest economic contraction in the second quarter since the Great Depression.
The report from the Commerce Department on Tuesday added to dismal data this month showing a staggering loss of 20.5 million jobs in April and a collapse in retail sales and manufacturing production.
Housing starts tumbled 30.2% to a seasonally adjusted annual rate of 891,000 units last month, the lowest level since early 2015. The percentage decline was the biggest on record. Economists polled by Reuters had forecast housing starts would fall to a pace of 927,000 units in April.
Housing starts dropped 29.7% on a year-on-year basis in April. Homebuilding fell in all four regions last month.
U.S. financial markets were little moved by the data.
Though many states considered homebuilding as essential when they enforced lockdown orders in mid-March to curb the spread of COVID-19, the respiratory illness caused by the coronavirus, disruptions to building material supply chains likely weighed on activity in the last couple of months.
As the country gradually reopens, there are indications the worst of the homebuilding slump is likely over. A survey on Monday showed an increase in homebuilder confidence in May. With at least 21.4 million people having lost their jobs in March and April, however, housing market could remain subdued for a while even with mortgage rates near record lows.
Permits for future home construction plunged 20.8% to a rate of 1.074 million units in April, the lowest level since January 2015.
The housing market was back on the recovery path before the coronavirus pandemic struck, after hitting a soft patch that started in the first quarter of 2018 and lasted through the second quarter of 2019. It has expanded for three straight quarters. Economists are, however, expecting a sharp contraction in the second quarter.
With the housing market joining the broader economic slump, economists are estimating that gross domestic product (GDP) will shrink at as much as a 40% pace in the second quarter, the deepest since the 1930s. The economy contracted at a 4.8% rate in the January-March quarter.
Single-family homebuilding, which accounts for the largest share of the housing market, dropped 25.4% to a rate of 650,000 units in April. Single-family building permits declined 24.3% to a rate of 669,000 units in April.
In the volatile multi-family housing segment, starts dived 40.5% to a rate of 241,000 units last month. Permits for multi-family units fell 14.2% to a rate of 405,100 units.
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