Julie Schmit
USA Today
Housing starts hit a record low in April, driven by a plunge in new apartment construction while some improvement was seen in the single-family sector, the government said Tuesday.
The disappointing numbers indicate that a broad bottoming in the housing market — despite some recent signs that new home sales have strengthened and builder confidence is up — remains elusive.
Construction starts of new homes and apartments nationwide fell 12.8% last month from March to an annual rate of 458,000 units, the Commerce Department said. That’s down almost 80% from the peak in January 2006.
One glimmer of good news was that permits for single-family home construction edged up 3.6% in April from March, while starts posted a 2.8% gain month to month. Permits lead starts and indicate future construction.
The uptick in single-family activity indicates that “we’re hopefully bouncing along the bottom,” says home builder analyst Anna Torma of Soleil Securities. “But we’re cautious about a recovery.”
Torma says big numbers in unemployment, foreclosures and inventories of unsold homes will make anything but a shallow recovery unlikely for next year.
The situation is most dire for multifamily construction. In April, starts in the five-units-or-more category were down 42% from March. Production has almost ground to a halt. Financing for projects is hard to get. Some builders have too much debt, housing experts say.
“It is hard to envision those numbers getting any worse,” says economist Michael Montgomery of IHS Global Insight.
The mixed report deflated some of the enthusiasm generated Monday by a relatively strong earnings report by No. 2 home-improvement retailer Lowe’s and rising builder confidence as measured by the National Association of Home Builders/Wells Fargo Housing Market Index.
Home Depot, the leading home-improvement retailer, added to the dampened housing news Tuesday when it beat Wall Street earnings estimates but said consumers remain under pressure. Its shares closed Tuesday at $24.63, down 5%.
The monthly ups and downs of housing data aren’t surprising given the depth of the downturn, says Jim Haughey, chief economist at market researcher Reed Construction Data. Haughey doesn’t expect a sustained increase in housing activity for “at least a few months.”
Housing starts declined in April nationwide except in the West. There, a 42.5% gain offset a similar decline in the previous month. The West has been particularly hard-hit by foreclosures. April starts fell 31% in the Northeast, 21% in the Midwest and 21% in the South.
The home construction market has far to climb. While April starts were 80% off their peak, they declined 46% during the 1981 downturn and 60% in the 1986-91 period, Torma says.
