US housing builds momentum but could still stall

City A.M. Reporter
US housing starts touched a one year to 18-month high in April, but a drop in permits to a six-month low suggested the housing market recovery will remain slow.

The number of private houses on which building had started rose 5.8 per cent to a seasonally adjusted annual rate of 672,000 units, the Commerce Department said, likely supported by the looming expiry of a home buyer tax credit. March’s housing starts were revised to show a five per cent increase, instead of a 1.6 per cent gain.

Markets had expected housing starts to rise to 650,000 units. Compared to April last year, starts were up 40.9 per cent, the largest increase since March 1994.

Separately, prices paid by farms and factories dipped 0.1 per cent last month following a 0.7 per cent rise in March, the Labor Department said. That compared to market expectations for a 0.1 per cent gain.

US stock index futures held gains after the data, while Treasury debt prices remained flat.

Ground breaking for single-family homes rose 10.2 per cent last month to an annual rate of 593,000 units after a 2.1 per cent increase in March. Starts for the volatile multifamily segment tumbled 18.6 per cent to a 79,000-unit annual pace, partially reversing the prior month’s 24.4 per cent surge.

A survey on Monday showed home-builder sentiment rose to its highest level in more than 2.5 years in May, encouraged by strengthening economic recovery, which builders hope will support construction when the incentives end. Investment in new homes contracted in the first quarter after two quarters of growth.