Single-family housing starts increased 18.5% on a month-over-month basis to a seasonally adjusted annual rate of 997,000, according to the U.S. Census Bureau and Department of Housing and Urban Development.
“Today’s single-family housing starts data came right in where we expected. The strong sales environment is giving builders more confidence to start more homes, especially quick move-in inventory,” says Zonda chief economist Ali Wolf.
Fannie Mae chief economist Doug Duncan says the increase in percentage terms is the largest single-month jump since the COVID-19 pandemic rebound in June 2020.
“While continued growth in new-home construction is consistent with improving home builder sentiment and ongoing lack of existing homes for sale, we believe some of the report strength in starts is likely statistical noise,” Duncan says.
Privately owned housing starts increased 21.7% month over month and 5.7% year over year to an annualized rate of 1,631,000. The May starts rate for units in buildings with five units or more was 624,000.
“The multifamily number, however, is way stronger than qualitative feedback would suggest,” Wolf says. “We expect to see a more pronounced pullback in multifamily starts as the year progresses. Persistent inflation, high construction costs, and rent compression are all headwinds for future multifamily construction.”
Single-family housing units authorized by building permits increased 4.8% month over month to an annualized rate of 897,000. Privately owned authorizations increased 5.2% month over month to a rate of 1,491,000, but the May figure represents a 12.7% decrease compared with May 2022. Authorizations of units in buildings with five units or more were at a rate of 542,000 in May.
“While less impressive than the starts figure, single-family permits have steadily trended upward since January, indicating new-home construction is indeed in recovery from its winter trough,” says Duncan.
Single-family housing completions in May were at a rate of 1,009,000, a 3.9% increase from the revised April rate of 971,000. Privately owned completions increased 9.5% from April levels to an annualized rate of 1,518,000 in May. The May rate represents a 5% increase from the May 2022 rate of 1,446,000 completions. The May rate for units in buildings with five units or more was 493,000.