Construction of residential homes saw a significant increase in May, despite the economic impact of the COVID-19 pandemic.
Housing starts were at a seasonally adjusted annual rate of 974,000, an increase of 4.3% compared with a revised 934,000 for April but down 23.2% compared with 1.268 million in May 2019, 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 675,000, an increase of 0.1% compared with 674,000 in April. Starts of multifamily properties (five units or more per building) were at a rate of 291,000, an increase of 16.9% compared with 249,000 in April.
Housing permits also increased significantly in May. They were at an annual rate of 1.22 million, an increase of 14.4% compared with 1.066 million in April and an increase of 8.8% compared with 1.338 million in May 2019.
Permits for single-family residences were at an annual rate of 745,000, an increase of 11.9% compared with a revised 666,000 in April. Permits for multifamily dwellings were at a rate of 434,000, an increase of 18.3% compared with 367,000 in April.
“With economies reopening, home builders are slowly regaining traction in their goal to match surging buyer demand,” says Bill Banfield, executive vice president of capital markets for Quicken Loans, in a statement. “Last month’s increase in construction will help ongoing inventory issues and it’s encouraging to see low interest rates support buyer demand.”
In a separate statement, Odeta Kushi, deputy chief economist for First American, says “May’s record spike in homebuilder sentiment smashed expectations and is further evidence of a housing market recovery.”
“Low mortgage rates are boosting demand for homes, and builders are responding,” Kushi says. “Today’s month-over-month increase in housing starts indicates a turn may be on the way. Housing permits, a leading indicator of future starts, are up 14 percent, and 12 percent for much-needed single-family homes. This bodes well for further increases in starts in the coming months.”
Kushi further adds that May brought an increase “in residential construction employment, a necessary input for increasing the pace of housing starts.”
“The construction industry does not lend itself to automation, so more the hammers we put to work, the more homes we can expect to build,” she says.