Residential construction in the South is showing signs of strain, with building permits plunging to their lowest level in nearly five years, even as housing starts rebounded strongly, according to the latest Census Bureau data.
Why it matters: The sharp drop in building permits indicates builders are cautious about future market conditions, reflecting concerns over affordability, high inventories in key markets, and persistent cost challenges.
By the numbers: Building permits in the South fell 9.6% to a seasonally adjusted annual rate of 754,000 units in April, marking the lowest level since July 2020. Single-family permits dropped 5.3% to an annual rate of 539,000, hitting their lowest point since June 2020.
- Housing completions fell 7.3% in April to an annual rate of 779,000, the lowest since December. Single-family completions dipped 9.3% to 558,000 units, the second-lowest level this year.
Not All Bad: Despite the declining permits, actual housing starts rose notably, jumping 10.6% to a seasonally adjusted annual rate of 760,000 units, the third-best performance in the past year.
- Single-family starts managed a modest gain of 1.9% after a sharp decline the previous month.
Zoom Out: Nationally, building permits declined by 4.2%, housing starts rose 1.6%, and completions fell by 5.9% in April. Yet, the South remains pivotal, representing 53% of building permits and completions and 56% of housing starts nationwide.
What They’re Saying: Odeta Kushi, Deputy Chief Economist at First American, tweeted, “The slower pace of permits suggests a reduced rate of single-family groundbreaking in the upcoming months, due to higher inventory levels in key markets and ongoing challenges with costs and affordability.”
Bottom Line: Builders in the South are navigating mixed signals, balancing immediate housing demand against longer-term headwinds like high costs and persistent affordability issues.
