Interest Rate Roundup

Friday, May 16, 2008

Housing starts, permits pop in April; Multifamily leads the way

April residential construction data was just released, and the numbers showed a pretty sharp snapback from March's depressed levels ...

* Overall housing starts came in at a seasonally adjusted annual rate of 1.032 million last month, up 8.2% from an upwardly revised 954,000 in March (previously reported as 947,000). Starts were down 30.5% from 1.485 million in April 2007, but well above forecasts for a reading of 939,000.

* Building permit issuance also popped -- 4.9% to 978,000 units from an upwardly revised 932,000 in March (previously reported as 927,000). That's still down 32.9% from the year-earlier reading of 1.457 million, but above the average forecast of 978,000.

* Breaking it down by property type, single-family starts were down 1.7% to 692,000 from 704,000. But multifamily starts rose 36% to 340,000 from 250,000. Single-family permitting activity increased 4% to 646,000 from 621,000, while multifamily permitting climbed 6.8% to 332,000 from 311,000.

* Regionally, starts fell 12.8% in the Northeast. But they rose 24.4% in the Midwest, increased 3.6% in the South and rose 18.5% in the West. Permits dipped 1.8% in both the Northeast and the South. But they climbed 11.9% in the West and 27% in the Midwest.

My favorite weatherman forecast is "a mixed bag of clouds and sun." Not sure why, I just find it catchy. And frankly, that's how I'd describe the latest housing numbers. On the one hand, housing construction rebounded from extremely depressed levels in March. On the other hand, the activity was driven by the volatile multifamily category. To give you an idea of how much multifamily starts jump around, consider the month-over-month changes reported during the last several months ...

April: +36%
March: -35.1%
February: +22.6%
January: +42.1%
December: -39.1%
November: -7.2%
October: +57%
September: -32.5%

Get the picture?

Meanwhile, single family starts are much less volatile and in that part of the market, the discouraging trend remains. One-family starts have now declined for 12 straight months in a row, leaving them at their lowest level since January 1991. The permitting data was a bit more encouraging, with both single-family and multi-family permit issuance rising last month. The key question is whether the pop in activity is sustainable.

We also can't lose sight of the demand side of the "supply and demand" equation. The news isn't all that encouraging there. While deeply discounted homes and REO super-bargains are moving, existing home sellers and home builders are still having a tough time clearing out inventory. That's the story told by the NAHB figures yesterday, which showed current sales activity slumping to a fresh low and buyer traffic waning.


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