May 18, 2010

Carrick: U.S. April housing starts rise to 672,000 units

U.S. national housing starts, seasonally adjusted and annualized, climbed to 672,000 units in April 2010, according to a joint press release issued today by the Census Bureau and the Department of Housing and Urban Development.

April’s level was 5.8% higher than in March and 40.9% above the figure recorded in April of last year.

Year-to-date starts in the U.S. were +22.2% compared with the same first four months of 2009.

Before one gets too expected by these statistics, it is well to remember that U.S. national housing starts peaked at 2.273 million units in January 2006 before the sub-prime mortgage mess exploded on the scene in August 2007 and the recession began in early 2008.

Here’s another cautionary note. The current month-to-month strength in starts is partly due to the imminent expiry of the $8,000 tax credit available to first-time homebuyers. April 30 was the deadline for taking advantage of the tax break.

May is likely to see a commensurate fall-back in starts. This argument is given validity by the 11.5% decline in residential building permits issued in April versus March.

That’s the very short term. The trend moving into the second half of this year is more encouraging.

U.S. employment and income gains are on the rise. April’s job growth of 290,000 was three times the monthly norm. Plus the Federal Reserve has committed to keeping interest rates at record lows for an extended period of time.

Regionally, the Northeast has been leading in year-to-date starts (+35.2%), followed by the South (+23.2%) and the Midwest (+17.4%). The West (+16.9%) has been the laggard, although not by much.

The South is currently accounting for 55% of total national starts.

The starts strength this year has all been in single-family units (+47.5% January to April 2010 versus the same period in 2009). Multiple-unit starts (-40.3% year to date) have been deeply depressed.

The multi-unit market, even more than singles, became wildly overbuilt and subject to speculation in the heady days prior to the housing market collapse.

Alex Carrick, CanaData chief economist

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