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Housing Starts Fall for 3rd Month

U.S. new home construction fell for the third straight month in April.



Starts declined by 7.4% for April to a seasonally adjusted 1.85 million annualized units. The decline was the largest drop in more than a year -- hitting the lowest level since November of 2004.



The decline was larger than expected. Wall Street economists had forecasted housing starts to remain flat in April at 1.97 million units, according to a MarketWatch survey.



Housing starts were at their highest in January, falling in February, March and April. The last time there was a three month decline in construction was the winter of 2003-2004.



Federal Reserve officials say that higher mortgage rates will gradually soften the housing sector. They do acknowledge that there is a risk of a sharp decline in activity.



Economists say that the recent weakness shown in the market during the past few weeks could be leading to a sharp correction in housing.



"Thus we may be seeing a sharp correction in housing, and relatively flat level for some time to come," said Josh Shapiro, chief U.S. economist at MRF Inc.



March construction was revised slightly higher to a decrease of 6.4%, to 2.00 million units. It had earlier been estimated that March had experienced a decline of 7.8%.



April saw starts of single-family homes falling by 5.6% to a 1.54 million annualized rate. Starts on multi-family homes fell 10.3% to 1.63 million units.



Building permits are an indication of future housing activity. They fell 5.4% to a 1.98 million annual rate. This is the lowest level for permits since February of 2004. Permits for single-family homes were down by 4.0%, to a 1.502 million annual rate.



Monday, the National Association of Home Builders and Wells Fargo said that their monthly housing market confidence index fell to the lowest point in eleven years.



Housing starts fell in the West and South, but saw increases in the Northeast and Midwest.



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