The housing market continues to decline sharply, according to the latest figures on new housing starts and residential building permits. The Census Bureau reported today that the annualized rate of new residential starts dropped over 10 points from March to April, and that single-family starts dropped 5.1%. Permit applications also declined by 4%, which indicates that no one sees much hope for renewed demand in the market:
Privately-owned housing units authorized by building permits in April were at a seasonally adjusted annual rate of 551,000. This is 4.0 percent (±1.1%) below the revised March rate of 574,000 and is 12.8 percent (±1.2%) below the revised April 2010 estimate of 632,000.
Single-family authorizations in April were at a rate of 385,000; this is 1.8 percent (±1.0%) below the revised March figure of 392,000. Authorizations of units in buildings with five units or more were at a rate of 143,000 in April.
Privately-owned housing starts in April were at a seasonally adjusted annual rate of 523,000. This is 10.6 percent (±13.0%)* below the revised March estimate of 585,000 and is 23.9 percent (±7.0%) below the revised April 2010 rate of 687,000.
Single-family housing starts in April were at a rate of 394,000; this is 5.1 percent (±10.2%)* below the revised March figure of 415,000. The April rate for units in buildings with five units or more was 114,000.
Housing completions rose in April, but that may not be good news. With new starts going sharply downward, the completions mean a lack of work in the construction industry. The decline will impact secondary industries for housing hard this summer, and unemployment will likely rise as a result.
The numbers for April represent the lowest in the two-year series, except for the short month of February this year. The overall number of starts, 551,000, beat February’s 534,000, but otherwise is lower than the previous two-year low of 555,000 in October. Single-family starts narrowly beat February’s 382,000 but the rest of the last 24 months showed single-family starts no lower than 403,000.
Reuters correctly notes that a glut of inventory is keeping the market depressed:
Housing starts and permits for future home construction fell in April as an overhang of homes on the market discourages builders from taking on new projects, pointing to prolonged weakness in the housing sector.
The Commerce Department said on Tuesday housing starts dropped 10.6 percent to a seasonally adjusted annual rate of 523,000 units. March’s starts were revised up to a 585,000-unit pace from the previously reported rate of 549,000 units.
Economists polled by Reuters had forecast housing starts rising to a 568,000-unit rate. Compared to April last year, residential construction was down 23.9 percent, the largest decline since October 2009.
Residential construction is being crowded out by an oversupply of used homes on the market, in particular, foreclosed properties, which sell well below their value.
The only solution for this is to produce more qualified buyers — and that means restarting massive job creation through pro-growth economic policies. President Obama continues to signal that he will expand the regulatory state and focus on gimmicky, capital-destroying government interventions, which keeps capital on the sidelines. With gas prices rising rapidly, the housing industry is correct to predict that the market will only get worse through 2011.
Update: Suitably Flip is suitably pessimistic about the economy after hearing this news.