Tuesday, May 19, 2009

Housing Starts Released on 5/19/2009 8:30:00 AM For April, 2009

Previous Consensus Consensus Range Actual
Starts - Level - SAAR 0.510 M 0.540 M 0.500 M to 0.560 M 0.458 M
Permits - Level - SAAR 0.513 M 0.494 M

Housing starts in April fell sharply to a new record low for a series going back to 1959, largely on cutbacks in multifamily construction. Starts dropped another 12.8 percent, following an 8.5 percent decline in March. The April pace of 0.458 million units annualized was down 54.2 percent year-on-year and came in well below the market forecast for 0.540 million units. April's decrease was led by the multifamily component which plunged 46.1 percent while single-family starts edged up 2.8 percent.

By region, the fall in starts was led by a monthly 30.6 percent drop in the Northeast along with declines of 21.4 percent in the Midwest and 21.1 percent in the South. Starts rose in the West jumped 42.5 percent.

Permits also declined at the national level, falling 3.3 percent in April, after dropping 7.1 percent the month before. The April permit pace of 0.494 million units annualized was down 50.2 percent on a year-ago basis.

Equities should be disappointed by today's starts numbers. It appears that many have forgotten that starts are far downstream in the list of housing indicators. It should be expected that improvement in indicators such as the homebuilders housing market index or mortgage applications will take a long time to trickle down to actual new construction. This is especially the case as a spike in foreclosures is threatening to delay the sell down of housing inventories. Homebuilders clearly understand that any new construction will likely sit on the market for some time, having to compete with fire sale prices on foreclosures.

Market Consensus Before Announcement
Housing starts fell back 10.8 percent in March, following a 17.2 percent rebound the month before. But going back to January, atypically wet and cold weather in the South depressed starts, leading to the sharp rebound in February - which also was abetted by milder-than-usual weather. Looking ahead, many analysts see a glimmer of hope for housing from the 3.2 percent boost in pending home sales. But supply is still quite bloated and existing homes on the market may be getting heavier with the recent spike in foreclosures. Homebuilders still are likely to keep starts low for some time.

Housing starts measure initial construction of residential units (single-family and multi-family) each month. A rising (falling) trend points to gains (declines) in demand for furniture, home furnishings and appliances. Why Investors Care

Data Source: Haver Analytics

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