Housing permits show strength in May

After exiting the most stringent government-imposed regulations due to the COVID-19 crisis, the housing industry continues to rack up solid gains.

Housing starts in May rose 4.3% from the revised April estimate of 934,000 to a seasonally adjusted annual rate of 974,000, according to the latest residential construction report from the Census Bureau and the Department of Housing and Urban Development.

Single-family starts edged up 0.1% to 675,000 from the revised April figure of 674,000. The May rate for units in buildings with five units or more is up 16.9% to 291,000. 

Although the latest report is 23.2% below the May 2019 rate of 1.268 million starts, industry experts continue to point to an under-built market that is being fueled by pent up demand and low mortgage rates.

“We are seeing many positive economic indicators that point to a recovery, including low interest rates, rising demand and an increase in mortgage applications,” said NAHB Chairman Dean Mon. “Single-family and multifamily housing production are on an upward path while overall permits, which are a harbinger of future building activity, posted a double-digit gain.”

Housing permits jumped 14.4% to a seasonally adjusted annual rate of 1.22 million from the revised April rate of 1.066 million. While this 8.8% below the May 2019 rate of 1.338 million, single-family permits authorized in May jumped 11.9% to a rate of 745,000 from the April rate of 666,000.

Authorizations of units in buildings with five units or more are up 18.3% to a rate of 434,000 in May.

“The May housing report is consistent with the positive results of the NAHB/Wells Fargo builder sentiment index, and we expect this momentum to continue as economic activity recovers,” said NAHB Chief Economist Robert Dietz. “In another promising sign, single-family permits are up almost 2 percent on a year-to-date basis and builders are bringing back thousands of workers laid off in March and April to meet renewed demand.” Permits for multi-family structures with 2 to 4 units rose 24.2% to 41,000.

Here's how housing starts break down by region on a month-over-month basis:

• In the Northeast, total starts are 12.8% as single-family starts soared 63.8%.
• In the Midwest, total starts fell 1.5% as single-family starts are down 16%
• In the South, total starts declined 16% while single-family starts dropped 6.9%.
• In the West, total starts rocketed upward by 69.8% as single-family starts are 21.5%.

Permits by region on a month-over-month basis are as follows:

• In the Northeast, total permits soared 82% as single-family permits increased 50%.
• In the Midwest, total permits 18.4% while single-family permits are up 12.2%.
• In the South, total permits rose 7.7% as single-family permits grew 5.6%.
• In the West, total permits climbed 12.3% as single-family permits shot up 21.3%.

The complete Monthly New Residential Construction Report for May 2020 can be accessed here. 

Additional evidence of growth in residential construction is in the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), released yesterday. Builder confidence jumped 21 points to 58 in June. Readings above 50 on the HMI indicate a positive market, according to the NAHB.