The Commerce Department this morning (May 16) reported that starts on new homes rose 2.5% in April, to a seasonally adjusted annual rate of 1,528,000 compared to the revised March estimate of 1,491,000. Single-family starts also were up 1.6% to a seasonally adjusted rate of 1,225,000 compared to March's 1,206,000. The rate for units in buildings with five or more units was 267,000.

Starts, however, were 16.1 percent below the revised April 2006 rate of 1,821,000. Regionally, starts were up 31% in the Northeast and 7.8% in the West and down 14% in the Midwest and 0.1% in the South. SEE DATA HERE

Building permits, on the other hand, dropped 8.9% to a seasonally adjusted 1,429,000 in April from March's 1,569,000, the largest drop since the last housing recession. On a year-over-year basis, permits were down 28.1% from 1,987,000 in April 2006. Single-family authorizations in April were at a rate of 1,063,000, 6.0% below the March figure of 1,131,000. Authorizations of units in buildings with five units or more were at a rate of 306,000 in April.

Home completions in April were at a seasonally adjusted annual rate of 1,523,000, a drop of 5.8% from March's 1,616,000 and 26.0% below the revised April 2006 rate of 2,058,000. Single-family housing completions in April were at a rate of 1,261,000, down 3.4% from March. The April rate for units in buildings with five units or more was 222,000.

The National Association of Home Builders saw the numbers in a positive light, pointing to the decline in permits as a more reliable indicator of what is going on in the marketplace than housing starts, which will increase inventory at some point. "The pattern of building permits clearly shows that the dramatic downward correction in housing production still is underway," said NAHB chief economist David Seiders. "Home buyer demand has been sent into another down leg by the abrupt tightening of mortgage lending standards, and there is an increasingly heavy supply of vacant housing units on the market. Under these conditions, builders are cutting back on new construction and intensifying their efforts to bolster sales and limit cancellations."