Disappointing Home Construction Starts Belie Firmer Market
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U.S. home construction starts rose less than forecast in May, indicating builders were slow to resume work and contrasting more recent data that points to a pickup in housing demand.
Residential starts rose 4.3% to a 974,000 annualized rate from a month earlier, the second-lowest level since 2015, according to a government report released June 17. That compared with the median forecast in a Bloomberg survey of 1.1 million and followed an upwardly revised 934,000 in April.
At the same time, applications to build, a proxy for future construction, climbed 14.4% to a 1.22 million rate. An S&P index of homebuilder stocks climbed 1.1% in earlier trade June 17.
“We aren’t much bothered about the undershoot in starts; the outlook is very positive, given the astonishing surge in mortgage demand,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note.
Other figures show the housing market is picking up steam. A weekly measure of mortgage applications for home purchases has increased for nine straight weeks and stands at an 11-year high. A report June 16 showed a gauge of builder sentiment rose by a record 21 points in June.
The government’s report June 17 showed a pickup in the number of residential projects authorized but not yet started, indicating groundbreaking may firm up in coming months. The number of single-family homes authorized and awaiting construction rose to an annualized 98,000 in May, the highest since December 2018.
Single-family starts were little changed from April. Multifamily starts, a category that tends to be volatile and includes apartment buildings and condominiums, jumped 15%, the first gain in four months.
Total starts were down 23.2% from May 2019. Starts dropped from a month earlier in two of four regions, including a 16% decline in the South to the lowest level since November 2014. New construction also fell 1.5% in the Midwest.
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