Housing units started by the nation's home builders surged by 11.6 percent in May to a seasonally adjusted annual rate of 1.73 million units, according to the U.S. Department of Commerce. Both the single-family and multifamily components of the market posted large increases, and every region of the country recorded solid gains in housing production.
“It's good to see that the housing market is back up to its first-quarter pace after some slippage in March and April — the ‘payback months’ following unusually good weather conditions, which spurred exceptionally strong production in the first part of the year,” said Gary Garczynski, president of the National Association of Home Builders (NAHB) and a builder/developer from Woodbridge, Va. “Housing is still doing its part to keep the economic recovery going forward.”
Garczynski attributed the impressive rebound largely to favorable interest rates on home mortgages. Rates on long-term contracts averaged 6.8 percent in May, and have since edged downward to 6.7 percent, while adjustable-rate mortgages (ARMs) have been available for less than 5 percent. “With a financing climate that good, many potential home buyers are being encouraged to take the leap — especially in view of strong house-price performance that has bolstered the investment potential of homes at a time when investments in the stock market have been performing badly,” he noted. He said NAHB's latest survey of home builders confirms that demand for new homes is holding firm in June.
Single-family housing starts rose 9.6 percent to a seasonally adjusted annual rate of 1.39 million units in May, their highest rate since February. Meanwhile, multifamily starts rose 20.3 percent to a rate of 344,000 units, partially offsetting a big dip in the previous month. Regionally, starts rose across the board in May, posting double-digit gains of 22.4 percent in the Northeast, 24 percent in the Midwest and 10 percent in the West. The South, which is the nation's largest housing market, registered a solid 6 percent gain.
Housing permits, which can be an indicator of future building activity, also rose in May, by 2.6 percent overall to a seasonally adjusted annual rate of 1.67 million units. Single-family permits rose a modest 0.7 percent to 1.27 million units, while multifamily permits rose 9.1 percent to 407,000 units. Total housing permits rose in all regions but the Midwest, which registered a decline of less than one percent.