Housing permits jumped to an annual rate of 612,000 in May, an 8.7% increase from the previous month, according to numbers released today by the U.S. Census Bureau. The gain was largely driven by improvements in the multifamily market. While permits for single-family homes gained 2.5% for the month, multifamily permits rose 29.3%. On an annual basis, permits gained 5.2%—an improvement driven entirely by multifamily numbers, as single-family permits dropped 6.9% year-over-year while multifamily permits gained 49.6% over that period.
Starts improved in both the single-family and multifamily sectors, gaining 3.7% and 2.9%, respectively. However, the annual production pace remains at an anemic 560,000 units, the 13th lowest on record. Single-family starts stood at an annual rate of 419,999 in May, while multifamily starts achieved an annual rate of 141,000.
While pointing to permits as the more important factor in the report, Patrick Newport, U.S. economist at IHS Global Insight cautions that multifamily numbers can be particularly volatile month to month, due to the large number of units in each project. Even so, "I think what is shaping up is we’re seeking what the recovery is going to look like," Newport said on a call with Builder. "People are shifting from owning to renting."
Newport points to the Joint Center for Housing Studies’ recently released report "The State of the Nation’s Housing 2011," which found that between 2006 and 2010, renters’ ranks gained 692,000 households annually while owner-occupied households fell by 201,011 each year.
According to Census data, between 2005 and 2010, the homeownership rate dropped from 69.5% to 66.5%. "These are huge shifts that we’re seeing," said Newport. "What it implies is that going forward, more builders are going to putting up rental homes, and there’s not going to be as much improvement in single-family."
Claire Easley is a senior editor, online, with Builder.
Learn more about markets featured in this article: Greenville, SC.