We just got the housing starts and permits figures for the month of May. Here’s what they showed …
* Total housing starts rose 17.2% to a seasonally adjusted annual rate of 532,000 from 454,000 in April. Building permits gained 4% to 518,000 from 498,000. Economists were expecting 485,000 starts and 508,000 permits.
* By property type, single family starts rose 7.5% to 401,000 units. Multifamily starts soared 61.7% to 131,000. Single family permits popped 7.9% to 408,000, while multifamily permits dipped 8.3% to 110,000.
* As far as the regional breakdown is concerned, starts gained across the board. They inched up by 2% in the Northeast, rose 11.1% in the Midwest, climbed 16.8% in the South, and surged 28.6% in the West. In the permits world, activity was up 2.3% in the South, up 3.8% in the West, up 5.7% in the Northeast, and up up 8.9% in the Midwest.
Housing starts continue to show extraordinary volatility, with large double-digit moves month in and month out becoming the norm. The biggest swings continue to be found in the multifamily market. If you can believe the data, MF starts plunged 49.4% two months ago only to soar 61.7% in May. Hmmm.
What I find more interesting is that we’ve had three straight months of gains in the less-volatile single-family arena. In fact, the 7.5% monthly increase in May was the biggest rise since January 2006. This adds to evidence that the housing market is no longer falling apart. Instead, much lower home prices are helping to stabilize demand and bring down inventories in some of the hardest-hit regions of the country. That, in turn, is bringing some builders out of the bunker.
Still, anyone expecting a rip-roaring rebound in the housing sector is going to be disappointed. Tighter lending standards, rising mortgage rates, and a dismal employment market will all combine to drag out the turnaround timeline, and ensure the recovery remains a muted one.
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Adjustable rate mortgage resets should be starting another wave, too, leading to more foreclosures.
Mike,
I have a question for you. Does there have to be an actual purchase contract on the property for there to be a housing start? So does it represent actual demand or “irrational exuberance” on the part of builders?
No, I don’t believe the numbers either, but I never believe the numbers being spun out of the “ministry of truth.” Also, aren’t most mortgage applications of late refi’s and not for home purchases? Yes, home prices have come down enough to bring some people out to buy, but, I agree with you, that there will not be a “rip roaring rebound” in housing. Builders are always overly optimistic and over build, as evidenced by all the empty properties sitting all over the Phoenix metro area. There is still way too much supply, and people are still worried about their jobs and the economy as a whole. I know I’m still not convinced we are out of the woods yet. I’m in a position to buy right now but am not buying because I’m not sure I want to be stuck in case I need to move.