Implications:   Housing starts posted the largest monthly drop on record in April, as the first full month of Coronavirus lockdowns took their toll on construction.  Uncertainty surrounding future buyer demand, supply chain disruptions, and social distancing measures for work crews likely all played a part in April's 30.2% decline. Looking at the details of today's report also shows that the slowdown was broad-based, with every major region posting declines, and both single-family and multi-unit construction falling as well.  Notably, the pace of new home completions has slowed a bit over the past two months, although not as quickly as the drop in starts.  This is likely because residential construction has been classified as "essential" in most areas of the country, so crews are still able to work, though in many cases with fewer people per crew.  Because of this, we expect the housing sector to weather the current economic contraction better than most.  Speaking of the future, permits for new construction fell 20.8% in April, the largest decline since the 2008, with both single-family and multi-unit permits moving lower.  That said, permits exceeded starts by one of the highest figures since the 2008-09 recession, suggesting pent up interest by builders in starting more homes.  Going forward, look for continued softness in the short-term, followed by a robust rebound in construction when issues surrounding Coronavirus ease.  Based on fundamentals like population growth and scrappage, the US needs to build about 1.5 million new housing units a year, a level that was only briefly reached before the pandemic hit our shores.  In fact, a rebound in construction could begin sooner rather than later if the NAHB Index, a gauge of homebuilder sentiment, is anything to go by. That measure was released yesterday, and increased to 37 in May after a record monthly decline resulted in a reading of 30 in April.  Keep in mind that readings below 50 indicate more builders view conditions as poor rather than good, but the bounce still represents progress, albeit from a low baseline.

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