Housing Concerns Ease as April Starts and Building Permits Top Expectations

(Updated - May 19, 2015 11:54 AM EDT)

Housing starts in April were 20% above the revised March estimate and topped consensus, coming in at 1,135,000 million vs 1,015,000 million expected, according to the U.S. Census Bureau. Results were the strongest so far in the current cycle and ease investor concerns.

Data also showed single-family housing starts in April were at a rate of 733,000, 17% above the revised March figure.

"Housing starts remain the most widely followed and forecasted housing statistic, so when they fell in 1Q15 there was concern about another disappointing year of housing growth. April data should help alleviate these concerns," said analyst Nishu Sood of Deutsche Bank. "Overall, it looks as though the depressing effect of poor weather on 1Q15 starts was meaningful and that this effect began to reverse in April."

The Census Bureau also reported data on building permits, which clocked in at a seasonally adjusted annual rate of 1,143,000, though single family authorizations rose only 3.7%.

Sood said he isn't worried.

"While this may give some housing observers cause for concern, we think permits growth should pick up as the year progresses. Permits didn’t fall as sharply as starts in 1Q15; also, their trends tend to be smoother. Another potential factor in slower permits growth is that builders may have been more concerned with getting construction schedules back on track with demand before focusing on future deliveries. All this would argue that if housing demand remains robust, then permits should see faster growth as well as the year progresses."

Following results, traders are watching:

D.R. Horton, Inc. (NYSE: DHI)
Pulte Group (NYSE: PHM)
KB Home (NYSE: KBH)
Lennar Corp. Cl A (NYSE: LEN)
Hovnanian Enterprises Inc. Cl A (NYSE: HOV)
Standard Pacific Corp. (NYSE: SPF)
Toll Brothers, Inc. (NYSE: TOL)
Ryland Group, Inc. (NYSE: RYL)
Meritage Homes Corp. (NYSE: MTH)
Beazer Homes USA, Inc. (NYSE: BZH)
SPDR S&P Homebuilders ETF (NYSE: XHB)

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