At 8:30 A.M. (EDT), the Department of Housing and Urban Development reported data on new residential construction for the month of May. At first blush, the data looked mixed, but further scrutiny revealed that steady progress in the housing sector, indeed, continues.
Specifically, the report showed that housing starts in May came in at a seasonally adjusted annual rate of 914,000 homes. While the latest tally was below the consensus expectation of 950,000 units, it was still 6.8% above the revised April figure and a notable 28.6% above the prior-year mark of 711,000. Meanwhile, building permits, which tend to be a more telling indicator of future construction activity, came in at a seasonally adjusted annual rate of 974,000. That figure was down 3.1% from the revised April estimate of 1.05 million units, but 20.8% ahead of the May, 2012 reading.
A closer examination showed that housing starts were actually up sharply, year to year, in three of the four major homebuilding regions, with noteworthy advances in the nation’s two biggest housing markets, the South and the West. Housing starts jumped 33.5% and 39.0%, respectively, in those two housing hotbeds. Building activity in the Northeast, the smallest homebuilding market, was off 9.0%. Meantime, building permits, while down sequentially, surpassed expectations and were up handsomely, year over year, in all four U.S. homebuilding regions. The latest data, along with yesterday’s excellent reading from the National Association of Home Builders/Wells Fargo Housing Market Index, suggest that homebuilding companies are becoming more optimistic about the ongoing prospects for the industry.
All in all, the latest data on housing starts and building permits should be considered another positive development for the homebuilding industry, which is a major contributor to the nation’s economic output. Confidence among U.S. homebuilders continues to rise. As noted, the National Association of Home Builders/Wells Fargo housing market index, a gauge of builder sentiment, hit a seven-year high this month, and was the best month-to-month gain in more than a decade.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.