Washington, DC, May 18--Anticipation of higher interest rates dampened home-building activity in April with residential construction experiencing a slight decline of 2.1% to an annual rate of 1.969 million new units, the Commerce Department said Tuesday.
That follows a revised increase of 6.1% in March to a 2.011 million rate. March starts, which were previously reported as rising 6.4% to a 2.007 million annual rate, were recalculated based on higher numbers for February. February's construction numbers were revised up to 1.895 million annual rate from a previous annual estimated rate of 1.887 million units.
The report was technically weaker than expected by analysts, who based their estimates on a lower annual rate for March. A Dow Jones Newswires-CNBC poll of 20 economists predicted new construction would fall by 1.3% to a 1.980 million annual rate from an annual rate of 1.9 million units.
The housing sector of the U.S. economy has remained strong for the past several years and has defied analysts' expectations as it weathered the 2001 economic recession. Near record-low mortgage rates have propelled the U.S. housing market to new heights in recent months.
Many economists, however, see a slowdown over the coming summer months as the Federal Open Market Committee is expected to raise the rates banks pay to borrow money from the Federal Reserve in late June--in response to positive economic data that indicates an economic rebound.
The 30-year fixed-rate mortgage has edged up over 6.0% in recent weeks, averaging 6.34% with 0.7 point for the week ended May 13, according to Freddie Mac.
The April report showed that building permits, an indicator of future new-home construction, rose for the sixth straight month, increasing 1.2% to a 1.999 million annual rate.
The report showed that single-family starts fell by 0.6% while multifamily starts, or starts on apartment buildings, dropped by 12.5%.
Housing starts rose in all regions except for the West where they fell by 13.7%. Housing starts rose by 4.5% in the Northeast, 1.2% in the South and 0.6% in the Northeast.
April housing starts have surged 20.3% from a year ago. An estimated 178,900 houses were actually started, based on seasonally unadjusted figures. An estimated 185,900 building permits were issued in April, also based on unadjusted figures. The Commerce Department bases its annualized numbers on monthly construction estimates projected over 12 months.
