Housing Starts at 11-Year High
Single-family housing starts were at a rate of 936,000 during May, according to new data from the U.S. Census Bureau and the U.S. Department of Housing & Urban Development (HUD). Last month’s rate represents a 3.9 percent increase from the revised April figure of 901,000, as well as reaching the highest level of activity since July 2007.
Privately-owned housing starts in May were at a seasonally adjusted annual rate of 1,350,000, a five percent increase from the revised April estimate of 1,286,000. May’s private-owned housing starts were also a 20.3 percent upswing from the May 2017 rate of 1,122,000.
Single-family authorizations in May were at a rate of 844,000, a 2.2 percent drop from the revised April figure of 863,000. Privately-owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 1,301,000, which is 4.6 percent below the revised April rate of 1,364,000, although it is also eight percent above the May 2017 rate of 1,205,000.
Single-family housing completions in May were at a rate of 890,000, up 11 percent from the revised April rate of 802,000. Privately-owned housing completions in May were at a seasonally adjusted annual rate of 1,291,000, up 1.9 percent from the revised April estimate of 1,267,000 and up 10.4 percent from the May 2017 rate of 1,169,000.
Reaction to the latest data was mostly optimistic, although some cautious comments pointed to potential difficulties in the near future.
“The construction market continued to improve in May, with permits—a good comparison indicator of building—up 8.9 percent from a year ago,” said Freddie Mac Chief Economist Sam Khater. “Over 40 percent of the rise this year is being driven by booming Western markets, up 15.1 percent so far this year. The pipeline of units under construction rose 5.3 percent from a year ago and is at the highest level in nearly 11 years. While the rise is good news, it’s still not enough for a hot real estate market that is starving for inventory during the peak summer sales season.”
National Association of Realtors (NAR) Chief Economist Lawrence Yun, said, “New home construction activity soared to its highest level in over a decade, which is fantastic news as more housing inventory will be available as the year proceeds. Moreover, construction and real estate industry jobs are being created and boosting the economy. GDP growth of four percent to five percent is possible in the second quarter, as a result. The Midwest Region experienced the biggest gain and hence the region will remain more affordable. The more unaffordable West region will continue to experience an intense housing shortage, as both housing permits and housing starts fell in that region. For the country as a whole, an additional 20 percent to 25 percent gain in home construction is needed to make the market more balanced.”
LendingTree Chief Economist Tendayi Kapfidze noted that housing starts “came in above expectations” and home builders were “responding to inventory challenges in the existing homes market.” However, he warned that controversial trade policy actions could derail this environment.
“Tariffs could lead to declines in housing starts in the second half of the year,” Kapfidze warned. “The homebuilder confidence index included a comment that tariffs have added $9,000 to the cost of new homes. CPI data last week also revealed a spike in prices of washing machines at the fastest pace since 2008, a product targeted in an earlier round of tariffs implemented on Feb. 7. An escalation in the tariff war between the U.S. and China will increase the costs of more household items and could put a damper on housing related spending.”