In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s second update discusses housing starts.
- Total housing starts rose slightly to 914,000 in May, slightly behind expectations, but 28.6% higher than the same point in 2012. The most recent peak for total starts was 1.005 million back in March of this year. The bulk of the increase came from the multifamily sector.
- Single family housing starts are closely watched because they reflect both builder confidence and potential supply, but more importantly they have a strong impact on job creation. Furthermore, home construction and sales drive consumption of goods and thus jobs in related industries.
- Single family housing starts inched up 0.3% from April to May and were up 16.3% over the year.
- Permits for construction of single family units increased 1.3% from April to May, but were up 24.6% from May of 2012. While the year-over-year growth trend is strong, it appears to have hit a plateau and may converge at a new baseline level under the long-term trend. Still there is much room for starts to catch up and to contribute to growth and job creation.
- New home construction is strong relative to recent history at 622,000 units in May, but remains well below the 1.06 million annual average from 1980 through 2001.
- While multifamily construction is on the rise, construction of single family homes remains tepid. These low levels are insufficient to ameliorate the inventory shortage in the current market. Low levels of construction will limit supplies and fuel modest price growth, but it will also limit the employment recovery.