Housing construction slowed for the second consecutive month in April, as the seasonally adjusted annual rate of housing starts fell to 1.538 million.
That was 2% below the revised March pace of 1.575 million units, and nearly 5% off the February pace.
Taken together with the drop in housing permits granted in April, the numbers seem to show that the housing sector is finally cooling off. The seasonally adjusted annual rate of permits granted for building was 1.518 million last month, 3% below the revised March figure.
But analysts emphasized that the numbers still point to extremely robust conditions that probably would not change much without a hike in interest rates.
"We are going downhill from the mountaintop. The question is are we descending fast enough" to dissuade the Federal Reserve from eventually raising rates, said Sung Won Sohn, chief economist at Norwest Corp. The answer, he said, is "probably not."
Though the Federal Reserve refrained from action on rates at its meeting Tuesday, economists said the housing market continues to be hot enough to raise inflationary fears on the part of the governors. The Fed is "seeing a sector that is continuing to contribute to robust growth to the economy," said economist David Lereah of the Mortgage Bankers Association.
The drop in housing starts was concentrated in the multifamily sector, which has been exceptionally strong since last fall.
Single-family housing starts, however, were up 1% from March to a seasonally adjusted annual rate of 1.241 million. That number might have been even higher were it not for shortages of materials and skilled labor, according to David F. Seiders, chief economist at the National Association of Home Builders.
"The problems I hear from builders have to do with labor and materials. These are symptoms of a really strong market," Mr. Seiders said.
The trade group's own monthly builder survey showed that demand for new homes remained strong in May, Mr. Seiders said. That showed in April's single-family permits data.
The permits issued for single-family construction in April were up 1% from March, to a seasonally adjusted annual pace of 1.145 million units.
Mr. Lereah said his trade group's index of mortgage applications for home purchases, which leads home sales by 60 to 90 days, continues to indicate record home sales in the months ahead.
Labor and materials shortages in construction, which might appear to understate the strength of demand for new construction, are aggravated by the slim inventories of new homes.
To avoid overbuilding, builders have turned increasingly to just-in-time building strategies commonly used by manufacturers. At the end of March there were 290,000 unsold new homes, a supply that would last 4.3 months at the March sales pace.