The Commerce Department reported Tuesday morning that housing starts took another leg downward in April, falling unexpectedly sharply to a seasonally adjusted annual rate of 458,000, 12.8% below a revised March estimate of 525,000 and 54.2% off the April, 2008 pace.
Wall Street was expecting the rate to come in around 520,000, but it appeared the decline was due to a large drop in multi-family construction as well as a continued softness in all but the West region.
Regionally, starts were down 30.6% month-to-month and 45.7% year-over year in the Northeast; down 21.4% and 52.5%, respectively, in the Midwest; down 21.1% and 57% in the South and up 42.5% sequentially but down 52.9% annually in the West.
Single family starts, however, were up over March by 2.8% to a rate of 368,000 but still down 45.6% from April last year. The single-family category was down 13.6% sequentially and 34.5% year-over-year in the Northeast; up 14.3% from March but down 36.6% from last April in the Midwest; down 4.6% and 47.6% in the South; and up 26.6% monthly but down 50.6% annually in the West.
Permits also were down, by 3.3% from the revised March estimate of 511,000, half the seasonally adjusted rate of April, 2008. The decline in permits also appeared to be concentrated in multifamily, with single-family permits moving up by 3.6% from March to a rate of 373,000, still 42.3% off last year's pace. Single family permits were up sequentially in the Northeast (+2.9%), Midwest (+6.9%) and the West (+17.9%). The South, however, was down 2%.
For all housing types, the March-to-April declines in permits were 7.1% in the Northeast, 4.8% in the Midwest, 3.4% in the South and flat in the West. On a year-over-year basis, the Northeast was down 51.9%, the Midwest down 49.4%, the South down 49.1% and the West down 52.3%.
Completions in April came in at a seasonally adjusted annual rate of 874,000, up 4.9% from March but15% below last April. Single-family completions in April were up 0.2% to 549,000.
In reaction to the data, Carl Reichardt, senior home building analyst at Wachovia Capital Markets, put out a note to investors stating, "Both single family starts and permits have shown signs of stability since achieving their all-time lows in January. ... While unsold new home inventories have declined 46% since their peak, we note that a flat, if not lower, single-family starts (SAAR) figure should be a general expectation in our view, given substantial vacant unsold unit inventory in the existing housing market, anticipated continuation of high foreclosure activity, and constrained capital availability for most homebuilders."
Stephen East at Pali Capital wrote, "All in, we view today's data as an ultimate positive for the industry. Excluding California Single-Family starts from the equation, which we believe is driven by that state's $10K credit for a new home purchase, builders are doing exactly as they should--putting less inventory on the ground."