Housing Data Inspire Little Hope

Updated from 9:18 a.m. EDT

Housing starts and new building permits came in higher than expected for April, but most of the boost came in the apartment and condo segment, as single-family construction remained weak.

Housing starts totaled a seasonally adjusted annual rate of 1.03 million in April, which was up 8% from March but down 31% from a year earlier. Economists expected 940,000, according to Briefing.com.

Single-family starts, however, fell 2% from March.

"Despite the headline rise, we're not seeing this as a great report by any means. Builders still aren't confident the market has bottomed, and neither are we," says Adam York, an economic analyst with Wachovia.

"All of the gains were in the multifamily segment, which historically is extremely volatile," he says.

Building permits, an indicator of future demand, totaled an annual rate of 978,000 in April, which was up 5% from March but down 34% from a year earlier. Single-family starts rose 4% from March.

The best piece of news in the report was that housing completions in April fell to an annual rate of 1 million, which was down 16% from March and down 35% from last year. Single-family completions fell 13% from March.

"Obviously we need to continue to build less homes to work off excess inventory we have," York says.

After an initial premarket surge higher, homebuilder stocks were up just fractionally in morning trading Friday, as investors recognized the starts report carried mixed messages for the building industry. Three of the largest builders -- Pulte Homes (PHM Quote), Centex (CTX Quote) and Toll Brothers (TOL Quote) -- were either flat or up just 1% in early trading.