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Housing Starts Drop Despite Improved Builder Confidence

In sharp contrast to reports of improving builder confidence, housing starts plunged at the steepest rate in more than two years in April, falling to a five-month low even as housing permits surged, the ""Census Bureau and HUD"":http://www.census.gov/construction/nrc/pdf/newresconst_201304.pdf reported jointly Thursday.

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The 16.5 percent month-to-month drop in starts to a seasonally adjusted annualized rate of 853,000 caught economists by surprise. The consensus forecast had been starts would fall--but to 969,000 from March's originally reported 1,036,000. March data was revised down to 1,021,000.

Housing permits rose sharply to 1,017,000--the highest level since June 2008--from March's 890,000, revised down from the originally reported 902,000.

The National Association of Home Builders reported Wednesday its ""Housing Market Index"":http://dsnews.comarticles/builder-confidence-shows-first-2013-gain-2013-05-15, a measure of builder confidence, improved to 44 in May, with all three components--current sales, the six-month outlook for sales, and buyer traffic--improving in the same month for the first time since last July.

Even the strong positive start activity was tarnished as single-family permits showed only a slight increase--and indeed, single-family homes represented 60.7 percent of all starts, the lowest share since last September.

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Year-over-year, single-family permits were up 27.5 percent, while multifamily permits surged 50.9 percent.

The disappointing start activity was split between a sharp drop in multifamily activity (down almost 39 percent month-over-month to 243,000 the lowest level since August) and a drop of 2.1 percent in single-family starts to 610,000, the second straight monthly decline.

According to the report, builders completed a total of 689,000 homes in April, down 115,000 or 14.3 percent from March. The drop in completions was equally split between single-family homes, down 58,000, and multifamily, down 57,000. Builders finished 594,000 single family homes in March, 177,000 more than the number of new homes sold that month--the largest gap between completions and sales since February 2011, when builders completed 208,000 more single-family homes than were sold that month. New home sales for April will be reported next week.
Total starts fell in April in three of the four Census regions, improving only in the Midwest to 153,000 from 138,000 in March. Starts fell 157,000 in the South to 406,000; 14,000 in the West to 212,000; and 12,000 in the Northeast to 82,000.

Single-family starts improved in three regions, dropping 44,000 in the South to 297,000 but increasing 21,000 in the Northeast--a function of rebuilding after Superstorm Sandy--to 64,000; 6,000 in the West to 140,000; and 4,000 in the Midwest to 109,000.

Total permits fell only in the Northeast (down 2,000 to 98,000) while improving 72,000 in the South to 5222,000; 31,000 in the Midwest to 170,000; and 26,000 in the West. Single-family permits fell only in the West--down 3,000 to 132,000--but increasing 12,000 to 334,000 in the South; 6,000 to 99,000 in the Midwest; and 3,000 to 52,000 in the Northeast.

_Hear Mark Lieberman every Friday on P.O.T.U.S. radio, Sirius-XM 124, at 6:20 a.m. Eastern._

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.
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