New residential construction falls

The beginning of construction on new homes took an unexpected dip in April, falling 10.6 percent as the housing market continues to search for a bottom.

Just 523,000 privately owned housing starts occurred in April, the Commerce Department reported Tuesday, compared with a 585,000 starts in March. The construction of new homes now sits at nearly 24 percent below the level seen in April 2010.

Single-family housing starts were down to 394,000 — a 5.1 percent drop from March.

The level of construction activity came in below economists' expectations. Experts polled by Reuters anticipated housing starts would actually climb to 568,000 for the month of April.

The completion of privately owned homes was actually up in April, growing 4.1 percent from March, to 554,000. However, that still lags far behind the number of homes completed in April 2010 — 25.5 percent more homes had been built at that time last year.

The construction of new homes has struggled to gain traction since the financial crisis, as the glut of foreclosures in the market, coupled with the continued drop in home prices, drives down the demand for new housing.

The latest bit of bad news for the housing market comes as lawmakers grapple with how to reform the nation's housing finance system. House Republicans are prepping a second round of bills aimed at winding down government-sponsored enterprises Fannie Mae and Freddie Mac, as they push for a wholly private housing system free of government influence. Meanwhile, Democrats are airing concerns about how accessible affordable mortgages would be if the government's role in housing is reduced or removed altogether.

The Obama administration has struck a middle ground in the debate, calling for Fannie and Freddie to be wound down and the government's role to be reduced. However, the White House contends that the government must play some supportive role in whatever new form the nation's housing market takes.

---