Housing starts in the U.S. unexpectedly rose last month, while building permits dropped to the lowest in almost a decade, signaling the increase in construction may be short lived.
Builders broke ground on new dwellings at an annual rate of 1.528 million in April, a 2.5 percent increase from a revised 1.491 million rate the prior month that was weaker than previously estimated, the Commerce Department said today in Washington. Building permits slumped 8.9 percent to a 1.429 million pace, the fewest since June 1997.
Some buyers are delaying purchases in anticipation of a drop in home prices as stricter lending guidelines and subprime mortgage defaults add to the glut of unsold properties, economists said. The housing recession remains the biggest threat to Federal Reserve forecasts of ``moderate'' economic growth.
``The drag from housing is going to continue for a while,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. ``The decline in permits suggests starts will weaken further.''
The decline in permits was the biggest since February 1990. Permits, a sign of future construction, were estimated to drop to 1.52 million from 1.564 million, according to the median forecast.
Let's break this number down from a couple of different angles.
1.) Last months figure was revised down. That means this months increase is a bit larger in relation. It also means this months number could be revised down as well.
2.) Building permits decreased 8.9%. That means the starts number is a blip on a downward trajectory.
3.) My guess is this number was slightly higher than anticipated because of weather related issues. That is, starts were down a in February because of weather, so March was skewed higher. That is just conjecture on my part.
Here's a link to the report at Census.
The report highlights a few interesting points.
Single units make-up 80% of the number. This number increased 1.6%. However, multiple units -- 5 or more housing units -- increased 6.4%. While this number makes up 17% of the total market, it may be a sign that builders are shifting to larger projects (read rentals).