Housing starts in May were at a seasonally adjusted annual rate of 1.631 million, an increase of 21.7% compared with April and an increase of 5.7% compared with May 2022, according to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
Starts of single‐family homes were at a rate of 997,000, an increase of 18.5% compared with April.
Starts of multifamily properties (five units or more per building) were at a rate of 624,000, an increase of 28.1% compared with the previous month.
Driving the increase was rising demand from homebuyers, who are getting desperate after facing more than three years of dwindling inventory.
“While affordability constraints weigh on demand, it is a lack of supply that is the limiting factor in today’s housing market,” says Ksenia Potapov, economist for First American, in a statement. ”There is plenty of demand on the sidelines, and prospective buyers are increasingly turning to homebuilders. As a result, new homes, which have historically made up approximately 11 percent of total inventory, now make up nearly 30 percent.”
Building permits in May were at a seasonally adjusted annual rate of 1.491 million, an increase of 5.2% compared with April but down 12.7% compared with May 2022.
Permits for single‐family homes were at a rate of 897,000, an increase of 4.8% compared with April.
Permits for multifamily dwellings were at a rate of 542,000, an increase of 7.8% compared with the previous month.
Housing completions were at a rate of 1.518 million, up 9.5% compared with April and up 5.0% compared with May 2022.
As Kushi notes, homebuilder sentiment has been increasing since early this year, which is a good sign.
“Homebuilder sentiment increased above 50 in June for the first time since July 2022, meaning builders consider conditions to be ‘good’ overall,” she says. “All three components of the index – current sales conditions, sales expectations in the next six months, and buyer traffic – increased.
“This is the sixth consecutive month of increasing sentiment, a leading indicator for starts,” Kushi adds. “Builders have good reason for a positive outlook. Existing-home inventory remains limited as the majority of homeowners are rate-locked into their homes.”
“Mirroring rising builder sentiment, single-family permits and starts increased in May as builders boosted production to meet unmet demand,” says Alicia Huey, chairman of the National Association of Home Builders (NAHB), in a statement. “Despite elevated interest rates that make the cost of housing more expensive, the lack of existing home inventory in most markets is leading to increased demand for new construction.”
“The May housing starts data and our latest builder confidence survey both point to a bottom forming for single-family residential construction earlier this year,” adds Robert Dietz, chief economist for NAHB. “There have been some improvements to the supply-chain, although challenges persist for items like electrical transformers and lot availability. However, due to weakness at the start of the year, single-family housing starts are still down 24 percent on a year-to-date basis.”
Photo: Annie Gray
