Construction rises as permits plunge

WASHINGTON (AP) -- Home building posted a small gain in April, but permits for future construction plunged by the largest amount in 17 years, a sign the nation's housing industry is still in a deep slump.
Construction of new homes and apartments rose to a seasonally adjusted annual rate of 1.528 million units in April, an increase of 2.5 percent from the March level.
Even with the improvement, housing construction is 25.9 percent lower than a year ago, reflecting the amount of the slide since a five-year boom in housing ended last year.
In a troubling sign for the future, builders cut their requests for new construction permits by 8.9 percent in April. That was the sharpest drop since a 24-percent fall in February 1990, another period when housing was going through a significant downturn. The slide pushed the annual rate for permits down to 1.429 million units, the lowest level in nearly 10 years.
While the April increase in actual construction was the third consecutive advance, analysts said the far more telling figure was the steep slide in permits, given that they are viewed as a far better indicator of where housing is headed.
"The drop in permits is one of the biggest on record. It suggests the contraction is housing is not over and has some months to play out," said Bill Hampel, chief economist for the Credit Union National Association.
Housing, which had enjoyed record sales in both new and existing homes for five straight years, saw the boom end dramatically in 2006 with many formerly red-hot sales areas suffering big declines in sales and prices.
The slump in housing has been a drag on the overall economy, pushing business growth down to a lackluster 1.3 percent in the first three months of this year, the weakest performance in four years.