Economic Watch: Housing Starts Surge, Consumer Sentiment Dips

Housing starts in the U.S. jumped again in April, while the number of new building permits issued hit it best level since 2008, according to the U.S. Commerce Department.

The 13.2% increase in new construction from March pushes the annual rate to 1.072 million, the highest level since last November, 26.4% higher than the same time in 2013. Single-family home starts increased 0.8% in April, with the rest of the overall hike in the volatile apartment sector.

The number of building permits issued, an indicator of future home construction, increased 8% from March, hitting an annual rate of 1.08 million, 3.8% higher from April 2013 and the best rate since June 2008.

A separate report shows builder confidence in the market for newly built, single-family homes in May fell one point to 45 from a downwardly revised April reading of 46, according to the National Association of Home Builders/Wells Fargo Housing Market Index.

“After four months in which the HMI has shown little signs of fluctuation, it is clear that builder sentiment is becoming more in line with the market reality of a continuing but modest recovery,” said NAHB Chairman Kevin Kelly, “However, builders expressed some optimism that sales will pick up in the coming months.”

The index’s components were mixed in May. The component gauging sales expectations in the next six months rose one point to 57 and the component measuring buyer traffic increased two points to 33. The component gauging current sales conditions fell two points to 48.

“Builders are waiting for consumers to feel more secure about their financial situation,” said NAHB Chief Economist David Crowe. “Once job growth becomes more consistent, consumers will return to the market in larger numbers and that will boost builder confidence.”

Finally, a third reading on the health of the economy shows consumer feelings about the economy slipped this month, according to the Thompson Reuters/University of Michigan Index of Consumer Sentiment.

It fell to 81.8 from 84.1 in April, despite a consensus poll of economists who were forecasting a small increase.

"The main concern behind the small May loss involved dispiriting trends in wages," said Richard Curtin survey director. However, he noted "consumers judged the current state of the economy at the most favorable levels in ten years."