Interest Rate Roundup

Tuesday, May 17, 2011

Housing starts, permits plunge in April

We just got our latest look at home construction, and it wasn't good ...

* Housing starts plunged 10.6% to a seasonally adjusted annual rate of 523,000 in April from an upwardly revised 585,000 in March. That missed expectations for starts of 569,000. Building permits fell 4% to a 551,000 SAAR from a downwardly revised 574,000 a month earlier. That also missed expectations for an increase to 590,000.

* By property type, single family starts slumped 5.1% while multifamily starts plunged 24.1%. The permitting breakdown was -1.8% for single family and -8.8% for multifamily.

* As for the regional breakdown, starts fell 4.8% in the Northeast and 23% in the South. They rose 3.7% in the West and 15.7% in the Midwest. Permits flat lined in the Northeast, but fell 0.8% in the West, 5.3% in the Midwest, and 5.7% in the South.

The housing market is a little like a pet rock. You keep starting at it, expecting it to start doing something ... anything! But month after month, it just sits there. In April, for instance, housing starts once again slumped into the low-500,000 annualized range while permitting activity faded 4%. That leaves home construction in the same depressed range it has been mired in for two and a half years.

The simple reality is that we had a once-in-a-lifetime bubble thanks to easy credit, nonexistent regulation, rampant speculation, and more. The government has responded by throwing hundreds of billions of dollars at the problem, while the Fed has been printing money like mad. Yet it has all accomplished very little. That just underscores the point I've made for a very long time -- the only "cure" for the housing bust is the passage of time and lower home prices.


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