WASHINGTON – Housings starts in the U.S. unexpectedly fell in April as home builders continued to struggle almost two years into an economic recovery.
Work began on 523,000 houses at an annual pace, down 11 percent from the prior month and less than the 569,000 median forecast of economists surveyed by Bloomberg News, figures from the Commerce Department showed Tuesday in Washington. Building permits, a sign of future construction, also decreased.
Rhode Island's Market Has Changed. Developers, Builders, Investors and Sellers Must Change With It.
By Emilio DiSpirito IV License Partner | Engel & Völkers Oceanside Leader | The DiSpirito…
Learn More
Falling home values and the prospect of more foreclosures entering the market mean home construction will be slow to gain traction. Unemployment at 9 percent and stagnant wages indicate any recovery in housing may take years to unfold.
“Housing isn’t going anywhere,” Steven Blitz, a senior economist at ITG Investment Research Inc. in New York, said before the report. “You have this huge overhang of existing homes and until that inventory is cleared to a normal level, you’re not going to get starts up. It’s going to take a very long time” for housing to recover.
Treasury securities rose after the report as the drop in construction gives Federal Reserve policy makers reason to keep interest rates low. The yield on the benchmark 10-year note, which moves inversely to prices, fell to 3.13 percent at 8:34 a.m. in New York from 3.15 percent late Monday. Stock-index futures were little changed.
Housing starts estimates ranged from 500,000 to 600,000 in the Bloomberg survey of 74 economists.
Revised Up
The Commerce Department revised March’s total to a 585,000 pace, up from a previously estimated 549,000. Starts reached a record low 477,000 pace in April 2009.
Building permits fell 4 percent to a 551,000 annual pace in April. They were projected to rise 0.9 percent to a 590,000 level, according to the survey median.
Construction of single-family houses decreased 5.1 percent to a 394,000 rate in April from the prior month. Work on multifamily homes, such as townhouses and apartments, fell 24 percent to an annual rate of 129,000, the weakest so far this year.
Starts dropped in two of four regions, led by a 23 percent decrease in the South, the largest area. They fell 4.8 percent in the Northeast and climbed 16 percent in the Midwest and 3.7 percent in the West.
Confidence Stagnates
Confidence among U.S. homebuilders was little changed in May, restrained by a drop in the sales outlook, a report from the National Association of Home Builders/Wells Fargo showed Monday. The group’s sentiment index held at 16 for a second month. Figures less than 50 mean more respondents view conditions as poor.
Sales of existing homes, which make up more than 90 percent of the market, rose 2 percent to a 5.2 million annual pace in April, economists surveyed by Bloomberg forecast the National Association of Realtors may report on May 19. Purchases of previously owned houses have been increasing on demand for lower- priced distressed homes.
CoreLogic Inc. in March estimated about 1.8 million homes were delinquent or in foreclosure, a so-called “shadow inventory” set to add to the 3.5 million existing homes already on the market.
Toll Brothers Inc. CEO Douglas Yearley Jr. last week said the April through June home selling season, typically the busiest of the year, has been “disappointing” and that “people are still scared.”
Demand for new houses will remain weak into 2012, said Bill Wheat, chief financial officer of D.R. Horton Inc., who last week also projected a housing recovery will take time to develop.
Jeffrey Mezger, chief executive officer of Los Angeles-based KB Home, said he expects sales to “bump along for the next 18 months.”
Wait till QE2 is over and the new stringent mortgage rules go into effect.