Housing Starts Show Surprising Growth in April
Construction starts on new homes rose by a surprisingly strong 8.2 percent in April and applications for new building permits turned up for the first time in five months, the Commerce Department said Friday in a report showing the hard-hit housing sector still had some spring vigor.
Starts in April ran at a 1.032-million-unit annual rate, up from a revised 954,000-unit rate in March, while permits gained 4.9 percent to 978,000 a year from a revised 932,000 in March.
Starts on multiple units buildings increase but single-family home starts fell.
Nonetheless, it was a significantly stronger overall performance than anticipated by economists surveyed by Reuters who had forecast April starts at a 940,000-unit rate and permits at 920,000 rate.
The jump in overall April starts was the biggest monthly increase since a 14 percent rise in January 2006, while the gain in permits was the largest since a 6.7 percent gain in December 2006.
The brighter picture on housing activity sent stock futures soaring and caused a pickup in the dollar's value against other major currencies. Bond prices were broadly lower as investors bet it reduced chances for more cuts in official interest rates.
"It's a nice upside surprise," said Joe Manimbo, a currency trader with Ruesch International in Washington, D.C. "Certainly it is the type of data that will back the view that US interest rates have bottomed, supporting the dollar."
New-home building has been in decline for months, partly because many builders are saddled with big inventories of unsold homes. But in addition, a wave of foreclosures against existing homes has caused many lenders to stiffen terms for making mortgage loans for both new and existing homes.
The April building bounce occurred entirely in multiple-unit dwellings, while single-family home building declined to a rate of 692,000 from 704,000 -- the lowest monthly rate since 604,000 in January 1991.
"Single-family starts continue to show weakness and (are) coming off a 17-year low," said George Adell, a fixed-income strategist with Commerce Capital Markets in Jupiter, Fla. "We can't say we've hit a bottom, but it's better than what we've seen."
Treasury Secretary Henry Paulson and top Federal Reserve policy-makers have identified the housing downturn as the biggest single risk for the economy and Congress has been working feverishly on proposals for guaranteeing shaky mortgage loans to try to save homeowners from losing their homes.
On Thursday night, housing industry sources indicated that leaders of the Senate Banking Committee had reached a deal on a broad housing rescue planin which mortgage giants Fannie Mae and Freddie Mac will support a federal mortgage insurance fund.
The $300 billion fund would be run by the Federal Housing Administration and would offer loan guarantees to help refinance distressed mortgages, with borrowers agreeing to forgive portions of troubled loans.