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US housing starts rose 1.6% in April, while construction on multi-family buildings surged ahead by over 10%. Zillow Group Senior Economist Orphe Divounguy sits down with Brad Smith to talk more about potential tailwinds for the US housing market as buyers get a late start to the spring buying season, as well as the activity on display from first-time homebuyers.
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Housing starts increased in April as a surge in multifamily builds offset a slump in single family housing starts. New construction on units like apartment buildings jumped over 10% in the month, while single family homes decreased about 2% to the slowest pace since July. Joining me now on this, we've got Orphe Divungi, who is the Zillow Group senior economist. Orphe, great to have you here with us. So, what does this data tell you about demand for homes right now?
Look, the housing market hit a bump on the road in April. Uh, we had basically peak policy uncertainty. Uh, the stock market plunged, and when people are uncertain about the future, uh, they tend to pause. They don't go out and buy a new car or buy a new home. Uh, newly pending sales, home sales on Zillow fell 2.5% from a year ago. And builders also took a pause, right? Uh, single family starts declined, uh, from the previous month. Uh, but essentially peak policy uncertainty is behind us. Uh, we saw the stock market correcting the April losses. Uh, at the same time, the labor market remains on solid ground, and mortgage rates are still lower than they were a year ago. All of those are tailwinds for housing market activity this year. And we think, uh, peak home shopping season might just have been a little bit delayed.
You know, even as we evaluate this data, kind of paired with what had just crossed the wires this morning from the University of Michigan, talking about the consumer sentiment index, and as we're looking at this 50.8 reading, I can't help but think about how that might continue to play out in the housing market. Uh, what are your anticipations for, especially coming off of what some have categorized as a weaker than expected spring buying season, how that could transpire into and permeate into the summer as well?
Yeah, look, I I think what you end up with is people kind of pausing. And if anything, the fact that affordability has improved somewhat over the past year, despite an increase in prices, uh, the typical mortgage payment is now 1.3% lower than it was last year. Uh, I think that's a potential tailwind for the housing market. I think what we're probably going to see is activity playing catch-up, uh, in the months ahead, and the peak of the home shopping season being delayed due to, uh, the policy uncertainty that we had, uh, at the start of the season.
And so, all this in mind, it seems like there is one specific cohort that is really putting the team on their back when it comes to home buying right now, and that seems to be coming from the first-time home buyers. What are you seeing show up in the data there?
Look, yeah, for first-time home buyers are are definitely affected. Remember, first-time home buyers are essentially your renters, right? Uh, they saw their rents increase way faster than their wages during the pandemic. Uh, but the good news for them is rent growth has eased, and you're seeing, uh, mortgage payments remaining much lower than they were last year. And so all of those are positive. They're making it work. The way they're making it work is by getting, uh, putting putting their funds together, getting help from family and friends. Nearly 40% of buyers got help, uh, from family and friends for down payment. Uh, people are co-buying now. So co-buying is is is becoming the norm. So all of those are helping out, but also down payment assistance programs, right? Zillow now has down payment assistance programs available on every single listing. And and so that's helpful. And so you're seeing people making it work, uh, and so, you know, we we expect the home shopping season to to pick up a little bit from last year. So our forecast currently actually shows that price growth could actually ease. We're seeing more price cuts, and, uh, with more homes on the market, more price cuts, that's actually supportive of home buying activity. Uh, sales, on the other hand, should actually increase relative to last year. And so that's kind of the general picture. We think the home shopping season might just be a little bit delayed due to the uncertainty that we got, but ultimately, peak policy uncertainty is somewhat behind us now.