A worker carries a ladder on the roof of a home under construction in Saratoga Springs, Utah, U.S. (Photographer: George Frey/Bloomberg)

U.S. Housing Starts Climb More Than Forecast as Permits Rise

(Bloomberg) -- U.S. new-home construction rose for a second month and topped estimates in April in a sign of positive momentum for the housing sector at the start of the second quarter.

Residential starts increased 5.7% to a 1.24 million annualized rate after a 1.7% gain in March that was previously reported as a drop, according to government figures released Thursday. Permits, a proxy for future construction, advanced 0.6% to a 1.30 million rate.

U.S. Housing Starts Climb More Than Forecast as Permits Rise

Key Insights

  • Starts and permits were both the strongest in three months, suggesting a brighter outlook for the sector amid lower mortgage rates and the Federal Reserve’s patience on borrowing costs. A report Wednesday showed homebuilder sentiment rose to a seven-month high in May, though the industry still confronts a shortage of qualified workers and buildable lots.
  • Reports due next week are forecast to show existing home sales, which make up about 90% of the market, picked up in April while new home sales were seen easing from a one-year high.
  • A separate report Thursday from the Labor Department showed initial jobless claims fell more than forecast last week to a four-week low of 212,000, offering the latest evidence the jobs market remains tight. The four-week average edged up.

What Bloomberg’s Economists Say

“A stronger-than-expected increase in housing starts at the beginning of the second quarter bodes well for residential investment to make a contribution to GDP growth after five quarters of declines. Housing is one of the few sectors benefiting from current market jitters and flight to quality in bonds as lower interest rates improve affordability.”

--Yelena Shulyatyeva and Carl Riccadonna, economists

Read the full note here

Market Reaction

A gauge of U.S. homebuilder shares climbed, heading for the highest close since June, led by gains for KB Home, Cavco Industries Inc. and Lennar Corp.

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  • Single-family starts rose 6.2% to 854,000 while permits fell 4.2% to 782,000. Starts for multifamily homes, a category that tends to be volatile and includes apartment buildings and condominiums, increased 4.7% as permits were up 8.9%.
  • Starts rose in two of four regions, led by an 84.6% surge in the Northeast that was the most in almost two years. The South and West both saw declines of more than 5%.
  • About 194,000 homes were authorized but not started, about in line with recent readings and indicating a steady supply.
  • Thursday’s data include historical revisions for seasonally adjusted estimates of housing units authorized but not started, started, under construction and completed back to January 2014. The figures are produced by the U.S. Census Bureau and the Department of Housing and Urban Development.

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