Housing permits in May rose 14.4% in May from April but were 8.8% below the mark set in May 2019. Housing starts also rose monthly growing by 4.3% in May. Housing starts, though, are 23.2% below last year’s numbers.
The Bureau reported that housing completions were down 7.3% in May when compared to April and 9.3% below the May 2019 rate.
Odeta Kushi, Deputy Chief Economist, First American Financial, said May’s spike in homebuilder sentiment “smashed expectations” and, coupled with low mortgage rates, are further evidence of recovery for the housing market.
“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%, and 12% for much-needed single-family homes. This bodes well for further increases in starts in the coming months,” she said.
Another positive sign, according to Kushi, is the increase in residential construction employment.
“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 said.
George Ratiu, Senior Economist, realtor.com said the summer season is “ripe for a surge in new home sales.”
“With continued phasing-in of business re-openings, several signs show consumers’ renewed energy, from retail sales and June builder sentiment to rising domestic flights and home shopping traffic. Under the long shadow of continuing health concerns, Americans are increasingly taking their home search to the suburbs, affordable mid-sized cities, and even rural areas with easy access,” he said. “These factors, combined with affordable mortgage rates, could provide some much-needed tailwind for shoppers looking to combine their vacation destinations with a new home, leading to higher sales.”
While there is optimism surrounding the Bureau’s data, Buildfax’s Housing Health Report revealed that May saw an 8.78% decline in single-family authorizations. Single-family authorizations fell 6.89% annually.
Jonathan Kanarek, Managing Director, BuildFax, said housing data can be a leading indicator of economic activity. And while the outlook doesn’t look positive, he does not expect the declines to continue.
“The promising bounce back of construction jobs, combined with improving homebuilder sentiment, suggests the recent slump in housing activity may be short-lived. Looking ahead, it will be particularly important to monitor the rebound in regional housing activity, not only for investors and traders but for industries like insurance, looking to capitalize on new business opportunities,” he said. “While it may take longer for the Northeast to kickstart new construction activity, the Midwest and South are likely to see a faster rebound, generating more opportunities for growth.”