Housing starts rose 3.5% from April to a seasonally adjusted annual pace of 560,000 in May, ahead of analyst expectations for a rate of 545,000 but 3.4% below May, 2010, the Commerce Department said Thursday. Permits rose 8.7% to a rate of 612,000, well above the Wall Street consensus forecast of 556,000 and 5.2% ahead of the pace of last May.
The April numbers were significantly revised as well. Starts, which were originally reported at 523,000, were taken up to 541,000 and permits, which were reported at 551,000, were revised up to 563,000.
Single-family starts rose 3.7% to 419,000, 8.9% below May, 2010; single-family permits rose 2.5% to 405,000, still 6.9% off last year's pace.
The gain in starts was driven in part by a big jump in the West, which was up 18.1% overall and 15.6% in single-family to paces of 137,000 and 89,000, respectively. The overall number was 20.2% ahead of last May; single-family was 4.3% below May, 2010.
Permits were up 15.1% in the West to 145,000, 28.3% ahead of last May, driven by gains in multi-family. Single-family was up 3.6% to a rate of 86,000, 1.2% above last May.
Starts in the South were up 1.5% to 271,000 overall and 1.9% to 220,000 for single-family, 6.2% and 4.8% off last year's pace, respectively. Permits were up 3.5% overall to 294,000, 2% off last May's pace, and up 2.9% for single-family, 6.1% behind the pace of a year earlier.
Starts in the Midwest fell 4.1% to a rate of 94,000, 11.3% off the pace of May, 2010. Single-family starts, however, rose 12.5% to a rate of 72,000, 10% behind last May. Permits were down 1.1% to 93,000, 9.7% behind a year earlier, with single-family up 4.7% to 67,000, still 8.2% off last year's pace.
Starts in the Northeast, where the data is routinely volatile and suspect, dropped 3.3% overall to a rate of 58,000, with single-family plummeting 19.1% to 38,000. That was 18.3% and 32.1% below the respective rates a year earlier. Permits jumped 35.6% to 80,000, driven by a surge in multi-family, up 21.2% from May, 2010. Single family permits were down 5.3% to 36,000, 23.4% off the pace of last May.
Adam Rudiger, home building analyst at Wells Fargo, saw the data as a modest positive. In a note to investors, he wrote, "While we believe an 8.7% sequential increase in permits (generally a leading indicator for starts) is encouraging, the vast majority of the rise was attributed to multifamily (with single-family units up a mere 2.5% sequentially). The May single-family permits SAAR of 405,000 is below the 411,000 average reported over the prior 12 months. Over the last ten years, actual single family starts in January through May have represented an average of 42% of the year's total SF starts. Based on year-to-date results, this would imply 403,000 single-family starts in 2011, down 15% yr/yr, but better than the down 16% yr/yr change implied using the same analysis in April. We also note that the May 2011 data are the first in the series that anniversary conditions post-the 2010 tax credit, so the comparisons are likely somewhat truer, in our opinion, as federal stimulatory policies are largely absent."