Housing Starts Rise as Builders Begin Working Through Backlog of Permits

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The Commerce Department released April New Residential Construction: Building Permits and Housing Starts data this morning.

From the Release...

HOUSING STARTS
Privately-owned housing starts in April were at a seasonally adjusted annual rate of 672,000. This is 5.8 percent above the revised March estimate of 635,000 and is 40.9 percent above the revised April 2009 rate of 477,000.

Single-family housing starts in April were at a rate of 593,000; this is 10.2 percent above the revised March figure of 538,000. The April rate for units in buildings with five units or more was 68,000.

BUILDING PERMITS
Privately-owned housing units authorized by building permits in April were at a seasonally adjusted annual rate of 606,000. This is 11.5 percent below the revised March rate of 685,000, but is 15.9 percent above the revised April 2009 estimate of 523,000.

Single-family authorizations in April were at a rate of 484,000; this is 10.7 percent below the revised March figure of 542,000. Authorizations of units in buildings with five units or more were at a rate of 103,000 in April.


HOUSING COMPLETIONS
Privately-owned housing completions in April were at a seasonally adjusted annual rate of 769,000. This is 19.2 percent above the revised March estimate of 645,000, but is 8.7 percent  below the revised April 2009 rate of 842,000.

Below is a summary of the data including a regional breakdown.

The uptick in Housing Starts was expected as last minute buyers rushed to finalize sales contracts before the homebuyer tax credit expired on April 30th.  The 11.5% decline in Building Permits was however not expected. The first thing that comes to mind when attempting to rationalize why Building Permits fell by an annualized 79,000 units is: OH NO THE TAX CREDIT HAS EXPIRED AND BUILDERS ARE LIMITING NEW CONSTRUCTION PLANS!

But then I look at the Building Permits chart above and I am reminded that permits rose steadily throughout the winter months even though housing starts were stuck at record low levels. Building Permits were preparing to break ground for the summer months ahead, now there is a backlog of permits to work through! I would expect the number of new Building Permits to move lower while previously approved Permits become new Housing Starts. The question is: how much of a backlog has accumulated and when does a lack of new building permits imply new construction will once again come to a standstill? It won't be long...we should see the two metrics get more in-line with one other by mid-summer.

Builders are feeling more confident about the next six months because they have orders to fill, but that doesn't change the BIG PICTURE perspective. Existing Home Sales and the Employment Situation Report are still the most important forward looking indicators for the health of housing. READ MORE