U.S. Housing Starts Rebound in May -- Update
19 June 2018 - 6:41PM
Dow Jones News
By Sharon Nunn
U.S. housing starts rebounded last month to the highest level
since 2007, driven by a construction rebound in parts of the
country that have lagged for much of the economic recovery as well
as a lingering apartment boom.
Housing starts rose 5% in May from the prior month to a
seasonally adjusted annual rate of 1.35 million, the Commerce
Department said Tuesday. Compared with a year earlier, starts were
up 20.3%.
The strong improvement was spread fairly evenly between
single-family and multifamily, despite expectations that builders
would pull back on new apartment construction given a flood of new
units already hitting the market. Single-family construction
increased 3.9% in May compared with a month earlier, while
multifamily building increased 11.3%, according to the Commerce
Department.
Midwestern builders also significantly ramped up construction,
good news for a region that had lagged compared with the South and
the West through much of the economic recovery. Housing starts in
the Midwest increased 62.2% in May compared with a month earlier --
albeit with a 28.1 percentage point margin of error.
Wells Fargo & Co. Senior Economist Mark Vitner said part of
the bump in the Midwest may be attributable to an improving
manufacturing sector. "The economic recovery has broadened and it's
reached parts of the country that hadn't seen improvement until
recently," he said.
Housing-starts data are volatile from month to month and can be
subject to large revisions. May's 5% jump for starts came with a
margin of error of 10.2 percentage points.
Building permits, which tend to be a more reliable indicator and
signal how much construction is in the pipeline, declined 4.6% to
an annual pace of 1.301 million last month. Permit declines in the
South and West drove May's permits figure lower. Permits last month
fell for both single-family and multifamily housing.
Nonetheless, housing construction appears on track to have a
slightly better year than many economists had predicted, thanks in
part to surprisingly strong multifamily growth.
Overall starts grew by 11% in the first five months of 2018
compared with the same period a year earlier. Multifamily starts
rose 13.3% during that period, while single-family starts rose
9.8%.
Still, builders face headwinds in the coming months. Rising
lumber prices have added nearly $9,000 to the cost of a new home
since January 2017, according to the National Association of Home
Builders, which reported on Monday that builder confidence ticked
down slightly in June.
Mr. Vitner said larger home builders have more power to
negotiate deals on material and labor prices, but smaller builders
are struggling.
"A lot of smaller builders are having to postpone projects...and
say let's just sit this out and see if prices come down," he
said.
Higher mortgage rates make it more expensive for home buyers,
potentially damping demand if the trend continues. "Rising costs
for land, labor, and materials are making it difficult to build
entry-level and affordable homes...This is on top of prices that
are rising due to strong demand and limited availability of homes,"
said Danielle Hale, chief economist for Realtor.com.
News Corp, owner of The Wall Street Journal and Dow Jones
Newswires, also operates Realtor.com under license from the
National Association of Realtors.
--
Sharon Nunn
contributed to this article.
Write to Sharon Nunn at sharon.nunn@wsj.com
(END) Dow Jones Newswires
June 19, 2018 13:26 ET (17:26 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.