April housing surprise

According to The Commerce Department – Housing starts and new building permits report came in stronger and surprisingly higher for the month April.

The report shows Housing starts increased 8.2% in April to 1.032 million units at an annual rate. The consensus was for a decline to a 939,000 rate.

Starts are down 30.6% versus a year ago and off 54.6% from the peak in January 2006. Building permits, meanwhile, jumped 4.9% to 978,000. The consensus forecast called for 915,000.

All of the gains were in the multifamily segment and most of the boost came from apartments/condos as single-family construction remained weak. Single-family starts fell to a 692,000 annual rate, the second slowest month since fiscal 1982.

Single-family permits increased 4.0% in April and are down more than 40% versus last year and 64.1% since the peak during fiscal ’05. Multiple-unit starts spiked 36.0% in April and are up 17.6% versus last year. Starts increased in the Midwest, South, and West but did fall in the Northeast.

One very positive aspect in the report was that housing completions in April fell to an annual rate of 1 million, which was down 16% from March and down 35% from last year.

Declines in home building and in particular – completions – help work off excess inventories and should be analyzed in our view as a positive development for future economic growth.

Today’s report despite the 8.2% increase shows a weakness in home building however, we seem to be getting some nationwide evidence of a potential housing stabilization.

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