In April, new home construction saw its biggest increase in more than two years. it was a rare spot of good news for the housing market, Market analysts said it's still too soon to affirm an end to the lingering housing slump.
Friday the Commerce Department reported that housing construction rose by 8.2 % in April to a seasonally adjusted annual rate of 1.03 million units. However, the building of single-family homes continues to weaken. Apartment construction was responsible for the large growth.
The rebound in April is predicted to be temporary because of the head winds builders are still confronting, from slumping sales to soaring home foreclosures.
The long-drawn-out housing slump has been a major drag on the economy, raising worries that the country is in danger of falling into a recession. On Friday another report showed that consumer confidence as measured by the University of Michigan/Reuters survey fell to a 28-year low of 59.5 in early May, down from 62.6 in April. Rising concerns about higher gas and food prices was blamed in part on the drop.
The strength in housing construction in April is due to the huge increase in apartment construction, which can be extremely unstable. The new apartment construction jumped by 36% to a seasonally adjusted annual rate of 340,000 units.
The single-family housing market sector dropped by 1.7% to an annual rate of 692,000 units. This was the 12th consecutive monthly decline and has reached its lowest point in 17 years.
There was an increase in April for applications of building permits, rising by 4.9% to 978,000 units, which is a good sign of future activity. This was the first gain we have seen for building permits in 5 months.
Until builders have more success in reducing a huge accumulation of unsold homes, the economists believe housing construction will remain under pressure.
The record wave of foreclosures is making the effort more difficult, as millions of borrowers lose their homes because they cannot keep up with escalating payments, particularly on subprime mortgages.
Compared to March, the construction posted the largest gain in the Midwest, an increase of 24.4% when compared to March. Construction rose 18.5% in the West and was up 3.6% in the South. In the Northeast, however, construction fell by 12.7%.
Housing construction nationwide was 30.6 % below the level of activity a year ago, even with the improvement.
On Thursday, the National Association of Home Builders reported that its monthly survey of builder sentiment edged down in May to a reading of 19, which was just above the all-time low of 18 set in December. The survey had held steady at the low level of 20 from February through April.
Contributed by MLR Realty
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