Home Starts Zooming and Booming in May
Robust demand fueled by low mortgage rates and favorable economic conditions kept new-home construction humming along at a fast pace in May, when starts edged up 0.2% to a seasonally adjusted annual rate of 2.009 million, according to U.S. Commerce Department figures released last week, which was 1.8% higher than the level of a year earlier.
Single-family housing production increased 4.7% in May to a yearly rate of 1.704 million units, which was 3.3% higher than the same month of last year.
“Builders are operating at full capacity,” said NAHB President Dave Wilson. “With mortgage rates and other market conditions still very favorable, they see no letup through the summer months ahead.”
“The overall housing market continues to exhibit ongoing strength,” said NAHB Chief Economist David Seiders. “Major forces driving the housing market ― very favorable mortgage rates as well as strong household income and job growth — continue to bolster housing demand. Housing production most likely will make another positive contribution to overall GDP growth for the second quarter as builders strive to meet the demand,” Seiders added.
Construction of new homes and apartments rose in three out of the four regions of the country last month. Housing starts were up 5.1% in the Northeast, 12.3% in the West and 18.7% in the Midwest. Starts declined by 12.1% in the South, following a 23.7% surge in new construction activity in April.
Multifamily housing starts sagged 19.3% in May to a seasonally adjusted rate of 305,000 units.
“The multifamily market is showing typical month-to-month volatility, but fundamental conditions in the condo and rental markets remain solid,” Seiders said.
Issuance of total building permits declined 4.6% from April’s upwardly revised level to a seasonally adjusted rate of 2.050 million units. Single-family permit issuance drooped 1.3% to a rate of 1.619 million units.
On a year-to-date basis, both housing starts and building permits are running significantly above last year’s levels.
“It is now highly likely that housing production in 2005 will surpass the robust performance of 2004, even if the interest rate structure moves up as projected,” Seiders said.
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