Builders broke ground on the fewest homes on record in April as a plunge in work on condominiums and apartment buildings overwhelmed the second straight gain in starts on single-family properties.
Housing starts slid 13%, to an annual rate of 458,000, a lower level than forecast, according to Commerce Department figures released Tuesday. The drop was led by a 46% tumble in multifamily starts, a category that tends to be more volatile.
The slump in home building has brought the supply of new properties below the rate at which new households are being created, offering some hope of a recovery in the second half of 2009, analysts said, though surging unemployment and the continuing credit crunch mean any recovery would likely be modest.
"This continues to support the story that new construction probably bottoms by early summer," said Adam York, an economist at Wachovia Corp. "We're getting closer, but that doesn't mean we're looking for a strong rebound," and "obviously, financing remains difficult for builders and buyers alike."
Starts were projected to increase to a 520,000 annual pace from a 510,000 previously estimated pace the prior month, according to the median forecast of 74 economists surveyed by Bloomberg News.
Building permits, a sign of future construction, fell 3.3%, to a record-low pace of 494,000. Permits had been expected to rise to a 530,000 annual rate, according to the survey median.
Construction of single-family homes rose 2.8%, to a 368,000 rate, the Commerce Department data showed, the second straight monthly gain. Work on multifamily homes, such as townhouses and apartment buildings, plummeted to an annual rate of 90,000 from 167,000 the month before.
"Now that fewer homes are hitting the market for sale, the growing U.S. population will have fewer homes to choose from," Tony Crescenzi, chief bond market strategist at Miller Tabak & Co. in New York, wrote in a note to clients Tuesday. "This will undoubtedly be a game changer for inventories and prices."
Starts fell 31% in the Northeast and 21% in both the South and the Midwest. Starts in the West rose 43%.
Home starts have plunged from a peak annual rate of 2.27 million in January 2006, which capped the biggest housing boom in six decades. Falling construction has weighed on economic growth and plunging home prices helped ignite the global credit crisis that exacerbated the economic slump.
Still, housing data in recent weeks has shown signs of stabilization. Sales of existing homes, which in January were the lowest since records began, have held within a narrow range centered on a 4.6 million annual rate for five months. Sales of new houses, while more than 70% below their 2005 peaks, have bounced from a record low set in January.
Foreclosure-driven declines in prices have helped the resale market settle. Distressed properties have made up as much as 50% of existing-home purchases in recent months, according to the National Association of Realtors.