Condos lift starts, houses at 17-year low
Written on May 18, 2008
WASHINGTON–Construction of new homes in the United States posted the biggest increase in more than two years in April. The growth was driven by a big jump in multi-unit construction as groundbreakings on single-family home fell to a 17-year low.
The Commerce Department said yesterday that housing construction rose by 8.2 per cent to a seasonally adjusted annual rate of 1.03 million units. But analysts predicted the surprising rebound in April would be temporary given the headwinds builders are still confronting, from slumping sales to soaring home foreclosures.
"It is definitely too early to uncork the champagne on the long and winding road to more healthy housing-market conditions," said Brian Bethune, an economist at Global Insight. He said he did not expect housing activity to stabilize until the end of this year.
The prolonged slump in housing has been a major drag on the overall economy, raising worries that the country is in danger of falling into a recession.
A separate report yesterday showed that consumer confidence as measured by the University of Michigan/Reuters survey fell to a 28-year low of 59.5 in early May, down from 62.6 in April.
The drop was blamed in part on rising concerns about higher gas and food prices.
Strength in housing construction in April came entirely from a huge increase in apartment construction, which can be extremely volatile from month to month cash advance. Building of apartments, defined as two or more units, jumped by 36 per cent. The larger single-family sector dropped by 1.7 per cent to an annual rate of 692,000 units, the 12th consecutive monthly decline.
Applications for building permits, considered a good sign of future activity, also recorded an increase in April, rising by 4.9 per cent to 978,000 units. It was the first gain in permits in five months.
But economists believe housing construction will remain under pressure until builders have more success in reducing a huge backlog of unsold homes.
That effort is being made more difficult by a record wave of foreclosures as millions of borrowers lose their homes because they cannot keep up with escalating payments.
Even with the improvement, housing construction nationwide was 30.6 per cent below the level of activity a year ago.
Filed in: money.