Distressed homes hamper April housing starts

The Census Bureau released monthly figures for April housing starts and the seasonally adjusted figure for fell 10.6 percent to 523,000 units.

Both the single-family and multi-family sectors tumbled in April falling 5.1 percent and 24.1 percent, respectively.

The decline in construction has a mixed impact. Construction was an important source of both income and job growth during most of the recent economic expansions and job creation will remain muted until the construction sector reemerges.

However, there is a large reserve of distressed properties on the market. Limited construction caps the new supply, better enabling the market to handle the excess supply until market conditions improve. In the meantime, the decline in new construction will slow new home sales in the near term as there are fewer new homes to be sold.

Total permits eased 4 percent. Permitting has experienced wide swings in 2011 and fell in three of the past five months. The tepid trend for permits reflects builder confidence which remained weak in May as reported by the National Association of Home Builders.