U.S. April Housing Starts Fall 6.8% to Lowest in Year
Washington, May 16 (Bloomberg) -- U.S. housing starts declined more than expected in April to the slowest pace in a year amid continuing job losses and anxiety related to the war in Iraq.
Builders broke ground on 1.63 million homes at an annual pace last month, down 6.8 percent from the revised 1.748 million-unit clip in March, the Commerce Department said. Economists surveyed by Bloomberg News had expected a decline a third as steep. The pace last month was the slowest since 1.587 million in April 2002.
The economy has lost more than a half-million jobs in the past three months, lessening the effect of some of the lowest mortgage rates on record. Last month's housing starts rate was slower than in April 2001, a month after the economy entered a recession.
``April was a slow month for the economy, and we entered the month with a war in Iraq,'' said Kevin Logan, senior market economist with Dresdner Kleinwort Wasserstein in New York. `Month- to-month housing numbers are very volatile, but the trend is fine. Housing is at a high plateau and is likely to stay there because interest rates are so low.''
Mortgage rates reached record lows this month, making it cheaper for consumers to buy homes and suggesting that home sales may rebound in the months ahead. The U.S. 30-year fixed mortgage rate fell to the lowest on record this week, according to Freddie Mac, the No. 2 buyer of mortgages.
Economists expected April starts to fall 2.2 percent to 1.74 million units at an annual pace, based on the median of 60 forecasts in a survey of economists by Bloomberg News. The March rate was previously reported as 1.78 million.
Stock Futures
U.S. stock futures extended declines after the housing starts report. June Standard & Poor's 500 Index futures lost 2.6 to 943.70 as of 8:44 a.m. in New York. Nasdaq-100 Index futures dropped 6 to 1157.50. Dow Jones Industrial Average futures slid 22 to 8675.
The number of building permits issued, a gauge of future construction, rose 1.2 percent to a 1.708 million rate from 1.688 million the month before.
Starts of single-family homes dropped 3 percent last month to a 1.356 million-unit rate. April starts of multifamily homes declined 22.5 percent to a 244,000 annual rate.
By region, starts dropped 7.1 percent in the Midwest to 329,000 units at an annual pace, 1.3 percent in the Northeast to 152,000, 10.9 percent in the South to 723,000 and 0.7 percent in the West to an annual rate of 426,000.
April housing completions gained 4 percent to 1.7 million units at an annual rate from 1.635 million.
Boost to Economy
The strength in the U.S. housing market has helped lessen the impact of the economic slowdown of the past three years. The economy expanded at a 1.6 percent annual rate during the first three months of the year, less than half the average rate of the last 30 years.
Weak growth and falling inflation have convinced Federal Reserve policy makers to keep their benchmark short-term interest rate at a four-decade low. Policy makers last week signaled that they are prepared to lower rates if they see a threat of deflation. The resulting record-low mortgage rates may buoy demand for housing in coming months.
The average rate on a 30-year fixed mortgage decreased to 5.45 percent for the week that ends tomorrow from 5.62 percent, according to Freddie Mac. The National Association of Home Builders yesterday said its index of homebuilder optimism rose in May as more prospective buyers came to see homes for sale.
The Mortgage Bankers Association of America said applications for U.S. mortgages jumped 13.7 percent last week as the low mortgage rates prompted a surge in refinancing. Purchases held close to the highest ever. The mortgage bankers this week raised their forecast for 2003 mortgage-loan volume 17 percent to $3.02 trillion from a forecast last month of $2.59 trillion.
Toll Brothers Inc., based Huntingdon Valley, Pennsylvania, the largest U.S. builder of luxury homes, last week said its homebuilding revenue rose 12 percent from a year earlier in the three months ended April 30.
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