WASHINGTON – U.S. housing starts unexpectedly rose last month while the number of building permits issued dropped to the lowest level in almost a decade, signaling that the increase in construction may be short-lived, according to Bloomberg News.
Builders broke ground on new dwellings at an annual rate of 1.53 million in April, a 2.5-percent increase from a revised 1.49 million rate the prior month that was weaker than previously estimated, the U.S. Census Bureau said today in Washington, D.C.
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Building permits slumped 8.9 percent to a rate of 1.43 million per year, the slowest pace since June 1997 and the biggest decline since February 1990. Permits issued had been expected to drop 2.6 percent to 1.52 million units per year from 1.56 million in March, according to the median forecast of economists surveyed by Bloomberg News.
“The drag from housing is going to continue for a while,” James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Conn., told Bloomberg. “The decline in permits suggests starts will weaken further,” he added, because permits are a predictor of future construction.
His attitude appears to be shared by U.S. builders, according to a report released yesterday, which shows they have become more pessimistic this month.
The National Association of Home Builders/Wells Fargo sentiment index fell to 30 points in May from 33 in April, matching its lowest reading since 1991.
(Readings below 50 indicate that most respondents view conditions as poor.)
Meanwhile, U.S. mortgage applications fell last week for the first time in four weeks, signaling that any recovery from the housing slump will be slow to develop, according to economists surveyed by Bloomberg News.
“An improvement in incomes, improving affordability and low longterm interest rates are keeping demand from falling out,” said Ellen Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. Still, she said, “the housing market won’t bottom out until the middle of the year. We have to work off those high inventories.”
The NAHB refinancing index was at 2,115.5 last week, little-changed from the previous week’s 2,115.2 and up 37 percent from a year ago.
The share of applications for refinancing rose to 42.1 last week from 41.8 the prior week, while that of applications for adjustable-rate mortgages dropped to 17.4 percent, the lowest since July 2003, from the previous week’s 18 percent. Gains in refinancing are being driven by owners switching to fixed-rate loans that provide a steady payment schedule.
Additional information, including the full New Residential Construction report released today by the U.S. Commerce Department’s Census Bureau and the U.S. Department of Housing and Urban Development, is available at www.census.gov/newhomesales.
