The report from the Commerce Department on Friday also showed permits for future home construction fell sharply last month.

"Builders are hitting the brakes this year in response to high uncertainty for costs and future demand," said Ben Ayers, a senior economist at Nationwide. "In addition to still-elevated mortgage rates, the building inventory within the existing home market may weigh on homebuyer interest in new builds. This environment makes it risky for home builders to start new projects, especially for time-consuming multi-family structures. We expect starts to fade further over the summer as conditions remain challenging for builder profitability."

Single-family housing starts, which account for the bulk of homebuilding, dropped 2.1% to a seasonally adjusted annual rate of 927,000 units last month, the lowest level since July 2024, the Commerce Department's Census Bureau said on Friday. Permits for future construction of single-family housing declined 5.1% to a rate of 922,000 units in April.

President Donald Trump's aggressive and erratic tariffs, including duties on lumber and steel, have left builders reeling. Though the U.S. and China de-escalated their trade war last weekend, uncertainty remains over what happens after the 90-day truce they agreed on. There is also no clarity on the fate of country-specific duties which were delayed until July.

A National Association of Home Builders survey on Thursday showed sentiment among single-family homebuilders plunged to a 1-1/2-year low in May, with 78% of builders reporting "difficulties pricing their homes recently due to uncertainty around material prices."

There is also a glut of unsold new homes, with inventory at levels last seen in late 2007. Starts for housing projects with five units or more jumped 11.1% to a rate of 420,000 units in April. That increase helped to lift overall starts by 1.6% to a rate of 1.361 million units. Building permits for multi-family housing units fell 4.4% to a rate of 431,000 units. Overall building permits dropped 4.7% to a rate of 1.421 million units.

Residential investment, which includes homebuilding, rebounded in 2024 after steep declines in the prior two years caused by a surge in mortgage rates. It grew at a moderate pace in the first quarter of 2025.

FRONT-LOADING IMPORTS

A separate report from the Labor Department's Bureau of Labor Statistics showed import prices gained 0.1% in April amid a surge in the costs of capital goods after dropping 0.4% in March. Economists had forecast import prices, which exclude tariffs, would decrease 0.4%. In the 12 months through April, import prices edged up 0.1%.

Imported fuel prices fell 2.6% in April after decreasing by 3.4% in March. Food prices were unchanged after dipping 0.1% in the prior month. Excluding fuels and food, import prices shot up 0.5% after a 0.1% fall in March. In the 12 months through March, the so-called core import prices increased 0.8%. Prices for imported capital goods jumped 0.6%, while those of consumer goods excluding motor vehicles increased 0.3%. Prices for imported motor vehicles, parts and engines rose 0.2%.

"The increase is likely driven by strong demand for capital, industrial, and consumer goods as businesses front-loaded imports," said Matthew Martin, a senior U.S. economist at Oxford Economics.