INSTANT VIEW: Housing starts at record lows in April

NEW YORK (Reuters) - New U.S. housing starts and permits unexpectedly fell to record lows in April, a government report showed on Tuesday, denting hopes that stability in the housing market was imminent.

KEY POINTS: * The Commerce Department said housing starts fell 12.8 percent to a seasonally adjusted annual rate of 458,000 units, the lowest on records dating back to January 1959, from March's upwardly revised 525,000 units. * Compared to the same period last year, housing starts tumbled 54.2 percent. * Analysts polled by Reuters had expected an annual rate of 520,000 units for April. * New building permits, which give a sense of future home construction, dropped 3.3 percent to 494,000 units, the lowest since records started in January 1960, from 511,000 units in March. * That was well below analysts' estimates of 530,000 units. Compared to the same period a year-ago, building permits plunged 50.2 percent. * Building completions rose 4.9 percent to 874,000 units.

COMMENTS:

ANNA PIRETTI, SENIOR ECONOMIST, BNP PARIBAS, NEW YORK

"The weakness is entirely driven by the multifamily starts. If you look at the headline, indeed this is a new record low, it would appear to be a negative. But if you look at the breakdown, we're beginning to see some stabilization in the single-family starts.

"It's the first real positive at the beginning of the second quarter. Multifamilies instead are plunging 46 percent. But this is a very volatile component, it is likely to rebound, I would really focus on that single-family starts.

"It's interesting to look at the momentum. Around the end of last year starts were declining quite rapidly, eased somewhat in January, they were fairly flat in February and March and now we have a positive in April. So the momentum really suggests that we have had a slowdown in the pace of decline and now we're starting to see some pick-up.

"I think it's still too early to call for a full reversal in the housing markets. We're not likely to move into a boom stage right now. There's still a lot of inventory that's unsold out there, vacancy rates are still really high. And we're likely to see some small positives, small negatives in the future. But overall the momentum clearly has stabilized. We have probably reached a bottom and we should begin to see some signs of improvement in the second half of the year."

T.J. MARTA, STRATEGIST, MARTA ON THE MARKETS, SCOTCH PLAINS, NEW JERSEY:

"You almost have to wonder if the (stock) market will say now there will be less excess inventory (of houses). That would be the silver lining of an otherwise very bad number.

"The negative is in the short term it will weigh on GDP. The positive is we are seeing creative destruction, in that resources in the economy are being reallocated away from the housing area, which is a good thing in the longer term."

MARK ZANDI, CHIEF ECONOMIST, MOODY'S ECONOMY.COM, WEST CHESTER, PENNSYLVANIA:

"The decline is centered on multi-family construction, which is very volatile. Single-family construction is up a bit, which could be the bottom for the sector. The second reason is that at this very low level of construction, inventories could be worked off very quickly. This could mean the end of the housing downturn will come sooner rather than later. People are looking at this as a glass half-full scenario."

RICK KLINGMAN, MANAGING DIRECTOR OF TREASURY TRADING, BNP PARIBAS, NEW YORK:

"It is a weak number, there is no doubt about it. The problem is that the tone of the market has changed in the last 24 hours. Equity markets globally have done much better and that's a problem for us.

"It looks like the market has been caught long. It has been surprised by what is going on in equities, and with any kind of bad news it seems looks like there are people waiting to be bailed out, looking to make a sale.

"The bond market has been trading poorly the last few days. Stocks keep trading better and better, so it does look like there is stuff for sale on any kind of rally."

KURT KARL, HEAD OF ECONOMIC RESEARCH AND CONSULTING, SWISS RE, NEW YORK:

"They just don't go up. What has to turn first is the sales, you have so much inventory out there. It is going to be some time late this year that this turns around. We are still bumping along the bottom, but the bottom is better than going south."

HUGH JOHNSON, CHIEF INVESTMENT OFFICER, JOHNSON ILLINGTON ADVISORS, ALBANY, NY:

"It's hard to find something in the numbers that's good or encouraging. Not only were housing starts below expectations but building permits, a precursor of future housing starts, also declined.

"It's just as I said a month ago - I can't imagine that housing starts and permits can get much weaker than they are. And you wait a month and they get weaker. It's almost as though there are no new houses being built. It almost takes your breath away. How do you describe conditions that are this weak and I'm not sure I can find a word that's strong enough. It's really surprising. These are really, really weak numbers.

"And the troubling one is the building permits. Housing starts I can live with but building permits says there is more ahead. So obviously this is not good news for the economy and for the markets. The only thing that's good is that you can't attach too much significance to any one month, you need to look at trends, but even then the trends are down."

PETER KENNY, MANAGING DIRECTOR, KNIGHT EQUITY MARKETS, JERSEY CITY, NEW JERSEY:

"This is not what the market was hoping for. The market was hoping for some sign of an easing in the downdraft in this all-important sector of the economy. That April was lower than March is not encouraging.

"Some good news is that building permits slackened. The first step to healing the housing sector is to eat into inventory. There's so much inventory on the market that the sooner we stop building and start eating into existing inventory the better off we'll be. There's too much actual and shadow inventory out there and it's continuing to drive deterioration in the space."

RICHARD LEE, MANAGING DIRECTOR, FIXED INCOME, WALL STREET ACCESS, NEW YORK:

"Most of the market is shaking off any bad news. Housing starts is almost secondary news so far. Banks are paying off TARP money so there's a bit of a sell-off in Treasuries."

BRIAN DOLAN, CHIEF CURRENCY STRATEGIST, FOREX.COM, BEDMINSTER, NEW JERSEY:

"It obviously calls into question the notion that the housing market is stabilizing. These are new record lows in housing starts. We've had a nice rebound from last week's gains in risk assets, and I think this will mean we're going to see a short-term top in stocks and a retreat in the yen crosses. I think we'll get a reprise of the notion that stock prices have hit some stratospheric levels."

MARKET REACTION: STOCKS: U.S. stock indexes pulled back after the report. BONDS: U.S. Treasury debt prices trimmed losses. DOLLAR: U.S. dollar was flat.