Continuing Deterioration in Residential Construction Bodes Poorly for the Economy

The Commerce Department just released its April report on new residential construction. Housing starts fell to a 50-year record low of 458,000 units. That's 13% lower than the figure for March, and 54% lower than the figure for April of last year. The number of permits for new construction also fell to a record low of 494,000. That's 3% lower than the figure for March, and 50% lower than the figure for April of last year.

The recent declines in housing starts and permits are wholly the result of reduced activity in the multi-family (apartment) sector. Many writers have made much of the fact that single-family activity is actually picking up (however slowly). That seems like wishful thinking. Demand for housing won't recover as long as the economy is losing jobs at a rapid pace. And residential construction activity has actually been a very good leading indicator of overall economic activity. Continuing rapid deterioration in this sector suggests that the broader economy is still deteriorating, and that an upturn in housing demand is still some ways off.