Housing Starts Drop in April, but Building Permits Increase

U.S. housing starts slid in April, the government said Tuesday, but permits to build new homes rose more than expected, a sign that builders foresee solid demand as buyers rush to lock in low mortgage interest rates.

The Commerce Department said home builders broke ground at a seasonally adjusted annual rate of 1.969 million units last month, down 2.1% from an upwardly revised 2.011 million in March. Analysts had expected starts to edge down to a pace of 1.99 million units.

“Housing starts declined slightly from March’s extremely high level but remained quite vigorous,” said Stephen Stanley, chief economist at RBS Greenwich Capital.

Permits, a sign of builder confidence, climbed to 1.999 million units in April, a 1.2% increase from an upwardly revised 1.975-unit pace the month before. Analysts were expecting permits to remain steady at about 1.95 million.

The National Assn. of Home Builders said Monday that its housing index, a gauge of builder sentiment on sales and buyer traffic, was at 69 for May, unchanged from April. A reading above 50 means the number of builders who see sales conditions as good exceeds the number who see them as poor.

Mortgage rates dipped to near 40-year lows at the start of 2004 but have risen in recent weeks as the U.S. economic rebound has solidified, fueling expectations for a near-term interest rate increase from the Federal Reserve.

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Reuters and Associated Press were used in compiling this report.