Interest Rate Roundup

Tuesday, May 19, 2009

Housing starts, permits fall again in April; Weakness concentrated in multifamily

The government just provided its latest look at housing construction and permitting activity. Here's what the April numbers showed ...

* Total housing starts plunged another 12.8% to a seasonally adjusted annual rate of 458,000 from 525,000 in March. Building permits slipped 3.3% to 494,000 from 511,000. Economists were expecting 520,000 starts and 530,000 permits. These figures are fresh all-time lows.

* By property type, single family starts gained for the second month, up 2.8% to 368,000 units. Multifamily starts plunged 46.1% to 90,000. Single family permits rose 3.6% to 373,000 from 360,000, while multifamily permits tanked 19.9% to 121,000.

* Regionally speaking, starts dropped 30.6% in the Northeast, fell 21.4% in the Midwest, and dropped 21.1% in the South. Starts rose 42.5% in the West. The regional breakdown of building permits showed activity flat in the West, down 4.8% in the Midwest, down 3.4% in the South, and down 7.1% in the Northeast.

The home construction industry continues to weaken, with both starts and permitting activity plumbing fresh record lows. But the devil is in the details here. The weakness in April was concentrated in the multifamily sector of the market -- condos, apartments, and so on. That likely stems from the ongoing condo glut and the tighter financing conditions we've seen in the commercial real estate arena.

Meanwhile, both construction starts and permitting activity actually picked up in the single-family home market. We're still at remarkably low levels. We still have a large glut of homes for sale, particularly "used" ones. But these figures add to the evidence of potential stabilization in that part of the industry.


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