April housing starts fall to record low
It looks like the green shoots are being momentarily stunted by a dry spell. U.S. housing starts plummeted 12.8 percent in April, the U.S. Commerce Department announced Tuesday (pdf).
Housing starts for new homes fell to a 458,000 annual rate in April -- the weakest level since the 1940s. Housing starts are now down more than 54 percent in the past year and about 80 percent since the peak hit about three years ago. Housing starts totaled a revised 511,000 annualized pace in March.
Economists surveyed by Bloomberg News had expected housing starts to total a 540,000 annualized rate in April.
Multi-family starts plunge
April's housing main culprit? A plunge in multi-family housing construction, which declined 46.1 percent to 78,000 annualized annual rate. Single-family home starts are also down sharply, 45.6 percent in the past year.
In addition, building permits fell 3.3 percent to seasonally-adjusted annual rate of 494,000 – a record low. Even worse, single-family home building permits are down 42.3 percent in the past year.
In April, housing starts decreased 7.1 percent in the Northeast, fell 4.8 percent in the Midwest, dropped 3.4 percent in the South but were unchanged in the West.
Housing continues to weigh on U.S. output
Maxwell Clarke, chief economist for IDEAglobal in New York said housing will continue to weigh on U.S. GDP.
"Weakness in housing continues," Maxwell Clarke told Bloomberg News Tuesday. "Declining prospects for developers should continue to act as a drag on investment and overall output in 2009."
Even with April's dismal housing data, many economists and analysts expect housing starts to begin to rise later in 2009. These housing sector observers say record housing construction declines have led to a new construction rate far before the replacement rate, which they put at about one million new homes per year. Overall housing inventories remain very high, but new housing is a distinct inventory category, due to the fact that some buyers will seek out and opt to purchase only new homes.
Housing Analysis: The April housing start data is a classic case study concerning why investors -- and home buyers, for that matter -- should evaluate the housing market based on several months of data, not one month. The U.S. Commerce Department cautions that one-month housing data is volatile and subject to revisions.
A February rise in housing starts suggested an upturn was ahead, but that has not occurred, as starts declined in March and April. Hence, we'll have to await data from the three to four month summer season before we can argue that a housing start bottom is in place.