() Washington – New home construction surged to its highest level in eighteen months in April, mostly due to the tax credit provided as part of the economic stimulus package passed by Congress, though the surge in new home construction in April points to the fact that the tax credit will expire shortly.

According to the US Commerce Department report released Tuesday morning, applications for new home construction rose 5.8% in April to a seasonally adjusted annual rate of 672,000.  Revised March figures were 635,000.  Last month’s single-family home construction rate was the highest its been since October 2008.

While things are looking up in the home construction trade, builders aren’t quite ready to pop Champagne corks just quite yet.

The Commerce Department revealed that building permits, a gauge of future activity, fell 11.5% to an annual rate of 606,000, marking the lowest point since October 2009.

In contrast, the National Association of Home Builders (NAHB) monthly builder confidence survey shows that confidence levels rose 3 basis points to 22, the highest level since August 2007, though still below a 50 reading, which indicates lack of confidence overall.

Low interest rates, a glut of new home inventory and in growing economic confidence is making this a ‘buyers’ market’, yet with foreclosure rates at an all-time high new-home construction will continue to compete with the existing home market.  It’s hoped that Congress will find it in its political heart to revive the home tax credit program one more time after extending the tax credit program to existing homes.  Yet what the market really needs are lenders more than anything else.

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