Housing Starts Reach Post-Recession High in May as Permits Soften


Total housing starts increased in May with gains in both the single-family and multifamily sectors. Starts increased 5% month-over-month to a 1.35 million seasonally adjusted annual rate, according to the joint data release from the Census Bureau and HUD. This pace is a post-recession high.

The rate of single-family starts was 3.9% higher in May, reaching a 936,000 annual rate. Recent growth trends for single-family starts match ongoing healthy levels of the NAHB/Wells Fargo Housing Market Index, now registering a score of 68. However, builders continue to report concerns about ongoing labor access issues and dramatic price increases for softwood lumber. Recent price increases for lumber are adding about $9,000 in price per newly-built single-family home.

On a year-to-date basis, single-family starts are 9.8% higher as of May relative to the first five months of 2017, performing better than our forecast. However, single-family permits, a useful indicator of future construction activity, declined 2.2% in May.

Multifamily starts (5+ unit production) were up 11% in May to a 404,000 annual rate. Multifamily construction activity has outperformed our forecast thus far this year. Our forecast calls for softer multifamily construction conditions in 2018. However on a year-to-date basis, 5+ unit production is up more than 13% compared to this time in 2017.

With respect to housing’s economic impact, 54% of homes under construction in May were multifamily (612,000). The current count of apartments under construction is roughly unchanged over the last year. In May, there were 515,000 single-family units under construction, a gain of more than 12% from this time in 2017.

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