The Census Bureau and the U.S. Department of Housing and Urban Development reported that housing starts rose from a revised 699,000 in March to 717,000 in April. As such, new residential construction has bounced back from its decline in March, putting it back on the pace seen in January and February which had 720,000 and 718,000 housing starts, respectively. This continues a slow-but-steady upward ascent in housing figures as the market begins to improve. Housing starts in April 2011, for instance, stood at 552,000 annualized units.
Unlike past months when multi-family construction dominated, both single-family and multi-family units increased in April. There are currently 492,000 and 225,000 new residential construction projects under way, at annual rates. Single-family housing starts, though, are still below their levels of December and January. This suggests that there is still room for more improvement.
Fortunately, single-family housing permits have also been on the rise, and while overall permits declined, single-family unit permits rose from 466,000 to 475,000. Total housing permits fell from 769,000 to 715,000 units, mostly from a decrease in multi-family permits. Still, the March figure appears to be an outlier, possibly from seasonal factors due to warmer weather. The current housing permits number is equivalent to the level of February, and the longer-term trend is positive.
This observation was also seen in the National Association of Home Builders (NAHB) and Wells Fargo report which was released yesterday. The Housing Market Index (HMI) rose from 25 in April to 29 in May, its highest level since 2007. Like the housing starts figures, the decline in April appears to be due to seasonal factors, as the HMI stood at 28 in both March and February. Improvements were seen in all regions except the West, with expected sales and potential buyer traffic up.
NAHB Chief Economist David Crowe, while elated about progress in the housing market, also cautioned that structural challenges still haunt the sector. He said, “The pace of this emerging recovery could be stronger were it not for the significant impediments that the market continues to face with regard to builder and consumer access to credit, inaccurate appraisals, and more recently, rising materials prices.”
Indeed, it will take some time before we are able to see a full recovery in this all-important sector, with many regions continuing to suffer from excess inventory, high proportions of the population in upside-down mortgages, and high turn-down rates for would-be home buyers. With that said, both the housing starts and NAHB figures show that there are signs of life in the housing market, which is highly encouraging.
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