Home construction in the United States recorded its worst plunge in April and permits for potential construction plummeted, raising concerns that the global health crisis would set the stage for the deepest economic nightmare since the Great Depression in the second quarter.
Tuesday's Department of Commerce study contributed to this month's grim figures showing a shocking loss of 20.5 million jobs. On top of a fall in retail sales and growth, the statistics show April could be the worst month in the ongoing economic downturn so far.
Sweeping lockdowns to curb the coronavirus pandemic proceeded to smash the US housing market. The residential sector started to slump 30.1 percent from the previous month to an annual seasonally adjusted rate of 891,000, the lowest point since 2015, the Department of Commerce said Tuesday. Analysts polled by Bloomberg had predicted a rate of 900,000.
Building permits were down 21 percent from March to a seasonally revised yearly pace of 1.07 million, a 5-year low. The decline in housing applications was the largest since July 2008. Single-family housing construction started to drop 25.4 percent to a rate of 665,000, also a 5-year decline.
No region in the United States escaped the downturn. Housing starts fell 43.5 percent in the Northeastern region, 15 percent in the Midwest, more than a quarter in the South and 43 percent in the West.
According to Matthew Speakman, economist for property firm Zillow, the historic drop in housing construction in April was "widely expected, but the decline is breathtaking nevertheless." Speakman added, based on an Associated Press report by Paul Wiseman, that the monthly decline in housing starts "was easily the largest on record.''
Sentiment surrounding homebuilding in the US has climbed this month by more than estimated after a record drop in April as a rally in profits and demand anticipations pointed to normalization in the US property market.
The National Association of Home Builders/Wells Fargo Housing Market Index was up 7 points to 37, based on Monday's figures. The gauge fell 42 points, the most in records to 1985, last month.
The median expectation in a Bloomberg poll of economists called for 35 for the current month. Numbers above 50 suggest more builders perceive conditions as good rather than dismal.
While a number of cities considered homebuilding necessary when they implemented shut down orders by middle of March to avert the spread of the virus, disruptions to building supply chains of materials likely weighed on construction in the last few months.