US April housing starts up but permits down

WASHINGTON - US home construction unexpectedly rose last month but permits for future building sank to the lowest pace in nearly a decade, a government report on Wednesday showed, pointing to extended troubles in the housing market.

By (Reuters)

Published: Wed 16 May 2007, 7:40 PM

Last updated: Sat 4 Apr 2015, 11:05 PM

The Commerce Department said housing starts hit a seasonally adjusted annual pace of 1.528 million units, a 2.5 percent increase from the prior month. That was above the 1.490 million pace analysts were expecting after a first reported 1.518 million rate in March that the government revised down to 1.491 million.

However, building permits, which signal future construction plans, dropped in April by 8.9 percent to a pace of 1.429 million units. That was the slowest pace since June 1997 when the pace stood at 1.402 million and well below expectations for 1.525 million units.

“This is a half full, half empty report because housing starts came in stronger than expected but permits are very weak,” said Michael Cheah, portfolio manager at AIG Sunamerica Asset Management in Jersey City, New Jersey.

“My inclination is to think the half empty will win, because much weaker permits suggest home builders are looking to retrench home building and that would lead to cutbacks in housing related jobs,” he added.

US stock futures rose on Wednesday as investors took the housing report initially as a sign the housing market might be stabilizing.

US government bond prices briefly extended gains after the weak April housing permits confirmed recent indications of a slipping housing market, despite a faster-than-expected pace of housing starts, traders said.

Even though housing starts increased in April to the highest pace since December 2006, they were down 16 percent from a year ago and, in a sign the troubled housing market may not be turning the corner as quickly as hoped, building permits were off 28.1 percent from a year ago.

A separate report on Wednesday showed US mortgage applications fell last week for the first time in four weeks, weighed down by sagging demand for home purchase loans.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and purchasing loans, for the week ended May 11 dipped 0.8 percent.

These latest reports lent credence to the pessimistic outlook on Tuesday by the National Association of Home Builders, which reported that home builder sentiment sank in May as lenders made it more difficult for borrowers to qualify for mortgages and order cancellations mounted.