Mortgage News - May’s Housing Starts Soared By Almost 22%

May’s Housing Starts Soared By Almost 22%

Mortgage News June 28, 2023

After the positive boost in residential builder sentiment, the latest report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development revealed a strong momentum in the housing market. Housing starts experienced a significant surge of 21.7% in May, reaching a seasonally adjusted annual rate of 1.63 million units. This marked a substantial increase from April’s revised count of 1.34 million units. The monthly growth was the largest percentage-wise since 2016 and ranked as the eighth largest since 1959.

May witnessed an impressive surge in construction starts, with a month-over-month increase of 291,000 units, the largest since early 1990. Despite a slower start to the year, total starts remain 15.5% lower on a year-to-date basis. However, the substantial monthly bounce is a positive sign. Overall, housing starts have risen by 5.7% compared to the previous year, marking the first annualized gain since April 2022. The recent rise in the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index, reaching a reading of 55, further bolsters the optimistic outlook.

In May, single-family starts reached their highest level in 11 months, surging 18.5% to an annualized rate of 997,000 units. The South region played a significant role in the overall growth, with a 21% increase in single-family starts compared to April. The scarcity of existing homes continues to drive momentum in the new single-family home market, and there is potential for further gains in the near future. Additionally, single-family permits saw a fourth consecutive monthly rise, increasing by 4.8% in May.

Multifamily starts experienced a significant recovery in May, surging by 27.1% compared to April following two consecutive months of declines. The noteworthy aspect was the 17% increase in the number of apartments under construction, reaching a yearly rate of 994,000 units, the highest since 1974. NAHB chief economist Robert Dietz expressed optimism that the positive building figures in May would have a favorable impact on the overall economy.

According to Dietz, the availability of more housing supply is beneficial for inflation data. He explains that increased inventory will contribute to lowering shelter inflation, which currently serves as a significant driver of growth for the Consumer Price Index (CPI).

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May’s Housing Starts Soared By Almost 22%

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