Housing starts unexpectedly rise 8.2 percent in April

ECONOMIC REPORT
Housing starts surge on condo construction
Single-family starts continue falling, touch 17-year low
WASHINGTON (MarketWatch) — U.S. home builders broke ground on 8.2% more homes in April, led by a 36% increase in multi-family units, the Commerce Department estimated Friday.
Housing starts rose to a seasonally adjusted annual rate of 1.032 million, far more than the 954,000 estimated for March or the 939,000 that economists surveyed by MarketWatch had been anticipating for April. See Economic Calendar.
It was the third increase in the past four months.
However, starts of single-family homes declined for the 12th straight month, falling 1.7% to a seasonally adjusted annual rate of 692,000, the lowest since January 1991. Read the full report.
The increase is certain to bolster the argument of those who see a bottom in the housing slump, a prerequisite for a return to a healthy banking system and economy.
“These figures strongly suggest that we are near the bottom,” wrote Ken Mayland, chief economist for ClearView Economics. “Most of the decline is already behind us.”
Others say that market suffers from a severe oversupply of homes and that the last thing the market needs is new construction.
“For the market to reach anything that looks relatively stable, we would need to see several more months of contraction” in single-family starts, said Joseph Brusuelas, chief economist for Merk Investments, who said the decline in single-family starts was the best news in the report.
“One good month is not a recovery,” wrote Ian Shepherdson, chief economist for High Frequency Economics. “Listen to the builders; NAHB survey yesterday was hideous.”
On Thursday, the National Association of Home Builders reported builder sentiment fell in May, with builders’ assessment of current sales conditions ranking as the worst in the 23-year history of the survey. See full story.
Construction of new multi-family units is extremely volatile, with month-to-month increases or decreases of more than 20% showing up in government data for each of the past five months.
Meanwhile, building permits increased 4.9% in April to a seasonally adjusted annual rate of 978,000, with single-family permits rising 4% and multi-family permits growing 6.8%. It marked the first increase in single-family permits in 13 months.
In the past year, housing starts are down 31%. Single-family starts are down 42%, the largest decline in 17 years.
Similarly, building permits are down 34% in the past year, while single-family permits are down 40%.
The government cautions that its housing data are volatile and subject to large sampling and other statistical errors. In most months, the government can’t be sure whether starts increased or decreased, and it can take four months for a new trend in housing starts to emerge from the data.
In April, the standard error for starts was plus or minus 14.5%. For multi-family units, the margin of error was 42.5%. Large revisions are common.
Over the past four months, housing starts have averaged 1.04 million on an annualized basis, up from 1.03 million in the four months through March, the first increase in four-month average since last May.
More details
The number of housing units completed dropped 16% in April to an annual rate of 1 million, the lowest in 26 years.
Single-family completions fell 13% to 792,000 units, the fewest in 25 years. The number of single-family homes under construction fell 2.5% to 549,000, the lowest in 13 years.
During April, starts fell 13% in the Northeast but rose by 24% in the Midwest, by 4% in the South and by 19% in the West, according to the government’s data. End of Story
Rex Nutting is Washington bureau chief of MarketWatch.

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