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Housing starts surge, yes, but mostly for apartments

Builders ramped up construction in April, but they were mostly building multifamily apartment buildings. A monthly report from the U.S. Census Bureau showed total housing starts up 13 percent month to month, but that was driven by a 43 percent monthly jump in buildings with five or more units. Single-family housing starts rose just under 1 percent for the month.

"Bottom line, with the home ownership rate down to 64.8 percent versus the 2004 peak of 69.2 percent, and the 50-year average of 65.4 percent, the trend to renting is obvious for a variety of reasons we all know," said Peter Boockvar, an analyst with the Lindsey Group. "Expect this trend to continue with the home ownership rate likely falling to below the 64 percent level, give or take, seen between the mid-1980's to mid-1990's."

Site superintendent Grant Cooksey of the Ramage construction company inspects a work site at the Norton Commons subdivision in Louisville, Ky., on Tuesday, May 13, 2014.
Luke Sharrett | Bloomberg | Getty Images
Site superintendent Grant Cooksey of the Ramage construction company inspects a work site at the Norton Commons subdivision in Louisville, Ky., on Tuesday, May 13, 2014.

Single-family home construction so far this year is well below last year. Starts were up just 2 percent from January through April in 2014, while they were up nearly 26 percent during the same time period in 2013. Some will blame weather, but builders say they are simply responding to demand and are also hampered by a lack of land and skilled labor.

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"But such shortages are to be expected following the long slump in home building during which workers quit the sector and there was little point in bringing land forward for development. These constraints will ease now that construction work and land development are more attractive options," noted analysts at Capital Economics.

Building permits, which are a better gauge of future construction activity, bode poorly for single-family homes. Those permits are down more than 3 percent from a year ago. This shows builders do not expect demand for single-family homes to strengthen any time soon. In fact, builder confidence in the single-family market slipped in May for the first time in four months.

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Meanwhile multifamily construction surged, seemingly unabated, and will continue: Multifamily permits rose to 478,000 from 400,000 to the highest since 2008.

Of all the multifamily starts in the first quarter of this year, 93 percent were intended for rental, and 89 percent were in 20-plus unit buildings, according to an analysis of census data by Trulia's Jed Kolko. Both numbers were around 60 percent during the last housing bubble.

—By CNBC's Diana Olick.

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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