Construction of new homes drops 10.6% in April

Builders started construction on fewer new homes in April while permits also fell, reflecting no sign of a rebound in the battered U.S. housing market.

Housing starts dropped 10.6% from March to an annual rate of 523,000 in April, the Commerce Department reported Tuesday, a rate nearly 24% lower than April of last year.

Economists surveyed by MarketWatch had expected housing starts to climb to 575,000 last month on a seasonally adjusted basis.

In a related report Tuesday, the Federal Reserve reported that industrial production was flat in April.

Housing starts have averaged a meager 542,000 over the last three months, indicating little change in the moribund U.S. housing market. Economists put more weight on a longer rolling average because the housing data often fluctuate sharply month to month.

In a healthy economy, new construction normally occurs at double the rate of April, but a high U.S. unemployment rate and the resulting inability of many Americans to keep up with their mortgage bills has depressed the market.

“The housing sector is at the mercy of the large number of foreclosures and will continue to weigh on the overall economic recovery,” said Jennifer Lee, senior economist at BMO Capital Markets.

New construction of single-family homes, which account for three-quarters of the housing market, fell 5.1% to an annual rate of 394,000. Construction of single-family homes is 30.4% lower compared with last year, when a tax credit helped boost sales.

Permits to begin new construction, meanwhile, declined 4% in April to an annual rate of 551,000. Permits give an indication of whether demand for new homes is growing or slowing.

Single-family home permits fell 1.8% last month to an annual rate of 385,000.

Bartash writes for MarketWatch.com/McClatchy.