Housing starts in April up 6.2% Some analysts say industry rebounding -- slowly but surely.

May 17, 1991|By Knight-Ridder

WASHINGTON -- Gains in three of four regions drove housing starts up 6.2 percent in April.

The jump was seen by some economists as laying the foundation for an economic recovery.

However, although the housing market is "coming off the floor, it isn't leaping off the floor," Robert Dederick at Northern Trust Bank in Chicago said, adding that any rebound is likely to be subdued.

Dederick noted that the rise in starts was mostly fed by the single-family sector, generally the first component to react to a lowering of interest rates by the Federal Reserve.

"It's kind of staggering along," said economist David F. Seiders of the National Association of Home Builders. "Hopefully, it will smooth out, but it will be a gradual affair . . . not the bounce-back like we had" at the end of previous recessions.

Commerce Department figures released yesterday showed housing starts had increased in April to an annual rate of 957,000 units.

However, permits to build new houses, a leading indicator, fell 3.0 percent to an annualized 865,000 units last month after gains in February and March.

The increase in April housing starts followed a revised 9.2 percent decline in March to 901,000 units and a revised 17.1 percent gain in February to 992,000. Since a January low of 847,000 units, overall housing starts have gained 12.9 percent.

The multifamily housing sector remains depressed, analysts said. Starts and permits for buildings of five units or more both declined in April.

Mark Obrinsky, economist at the Federal National Mortgage Association in Washington, said vacancy rates still are high, which could keep starts for multifamily units at record lows.

Nevertheless, Obrinsky said the housing starts report showed the industry was "back on the track of a gradual increase."

He noted more favorable weather in the West in April helped starts in that region climb to 238,000 units from 190,000 in March, when rainfall was above normal. Smaller gains in the Midwest and South were partially offset by a drop in the Northeast, the Commerce Department data showed.

Carol Stone, an economist with Nomura Securities International Inc. in New York, was less optimistic. Although the April housing data suggested the market was not getting any worse, Stone said there was no "major sign that there's a major recovery" under way.

"There is no sustained strength in this industry," she said.

She cited two factors that would help spark a recovery in housing: A healthier consumer outlook and more readily available financing.

Consumers who are skittish about the economy are not in a position to commit to home buying or building, she said, while potential buyers are still having problems obtaining credit despite recent lower interest rates.

Dederick said the persistent tightness in lending standards for builders in particular was holding back an industry rebound.

Obrinsky said mortgage rates are a "plus," but not a big factor for the industry. The 30-year fixed mortgage rate is now averaging 9.5 percent after hitting a low for the year of 9.25 percent in mid-February, he said.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.