Housing Starts and Permits Show Construction Sagging

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There's no good news for the home building market today. Both housing starts and permits declined in April, according to the Census Bureau. This confirms yesterday's report that the market for new home construction remained weak last month. For the home building collapse, there's still no recovery in sight.

Let's look at the charts. First, here's the annualized, seasonally adjusted number of new permits each month since 2000:

permit 2011-04.png

Although they had ticked up slightly in March, they declined again in April, by 4.0%. Year-over-year permits are down 12.8%. Other than the tiny peak in December -- which was driven in large part by multifamily dwellings -- new permits have been pretty steady in the mid- to upper-500,000's.

The picture isn't any prettier for starts, which indicate that new ground has been broken on a home:

starts 2011-04.png

Their March uptick was brief, as they gave back nearly the entire increase in April. They were down 10.6% for the month and 23.9% year-over-year. Although starts are a little bit noisier than permits, they're also settling at about the same rate as permits.

The news here is consistent with what we've seen since last summer. After the home buyer credit expired last spring, the housing market has yet to return in a very meaningful way. And most of the few sales occurring are of existing homes. New construction simply can't compete with mega-deals on the huge number of distressed properties out there.

Banks taking even more time to process foreclosures provides even worse news for construction. If they would process defaulted properties more quickly, then consumers could soak them up faster. Instead, we're looking at a bloated pipeline that may take a few years to work through. New home construction won't make much progress until that supply of existing properties shrinks significantly.

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Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.
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