The Official Online Weekly Newspaper of NAHB
Nationwide housing starts and issuance of building permits stalled in May following the expiration of a popular home buyer tax credit program, according to data released by the U.S. Commerce Department on June 16.
New-home production declined 10% to a seasonally adjusted annual rate of 593,000 units, the slowest pace since December 2009, while permit issuance declined 5.9% to a 574,000-unit pace, the slowest since May 2009.
“Not surprisingly, builders tapped the breaks on new-home production and pulled fewer permits for new homes in May in response to an expected lull in buyer demand following expiration of the tax credits at the end of April,” noted NAHB Chairman Bob Jones.
“May’s numbers show an anticipated pullback on single-family building following the tax credit deadline,” acknowledged NAHB Chief Economist David Crowe.
“No doubt, a certain amount of building and buying activity that would have taken place in May was pulled forward to accommodate the program’s end date, which is why we have projected some softening of the numbers in the second quarter,” Crowe said. “That said, in the coming months, an improving economy, rising employment, low mortgage rates and stabilizing home values should play their part to keep the housing market moving forward.”
Crowe noted, however, that the ongoing difficulties builders are having in obtaining financing for viable new projects and accurate appraisals of new homes are complicating factors that are slowing the industry’s recovery.
The decline in housing starts in May was entirely on the single-family side, where the government’s tax credits for first-time and repeat buyers had the greatest impact in the previous months. In that segment, starts fell 17.2% to a seasonally adjusted annual rate of 468,000 units, their slowest pace since May of 2009. Meanwhile, multifamily starts, which can be more erratic on a monthly basis, showed a dramatic 33% gain in May to a rate of 125,000 units.
Permit issuance, which can be an indicator of future building activity, fell 9.9% on the single-family side to a rate of 438,000 units in May, which was also the slowest yearly rate since May 2009. Multifamily permit issuance rose 9.7% to 136,000 units in May.
Regionally, housing starts were mixed in May, with the Northeast posting a 6.3% decline, the Midwest a 4.9% increase, the South a 21.3% decline and the West a 10.8% increase.
Permits fell in every region in May, with declines of 1.5% in the Northeast, 9.6% in the Midwest, 5.2% in the South and 6.8% in the West.