May Housing Starts Virtually Unchanged From Upwardly Revised April Number

June 17, 2004

The nation’s housing market continues to fire on all cylinders, according to May housing starts figures reported by the U.S. Commerce Department today.

"While the overall starts number was essentially flat, both single-family starts and building permits chalked up significant gains last month,” said Bobby Rayburn, a home and apartment builder from Jackson, Miss., and president of the National Association of Home Builders (NAHB).

"So far in this year’s second quarter, average new-home production is running at or above par with the very solid first quarter, and we see no signs of any systematic weakening in any of the four regions,” said NAHB Chief Economist David Seiders. "As anticipated, the effects of the strengthening economy and job market, along with attractive increases in house values, evidently are overriding the higher interest-rate structure as an influence on home buyers.”

Overall housing starts hit a seasonally adjusted annual pace of 1.97 million units in May, which was down less than one percent from April’s upwardly revised 1.98 million-unit pace. The decline was entirely on the multifamily side, where a nearly-10 percent dip was recorded to a 327,000-unit rate, but strong permit issuance in that sector indicates an impending bounce-back. Single-family housing starts rose 1.4 percent in the month to an historically healthy seasonally adjusted annual rate of 1.64 million units.

Building permits, which can be an indicator of future starts activity, were up 3.5 percent overall to a 30-year high of 2.08 million units in May, with single-family permits rising 3.0 percent to their highest rate on record – 1.59 million units. Permit issuance for multifamily units was up for the third consecutive month in May to a seasonally adjusted annual rate of 487,000 units.

On a regional basis, today’s report was something of a mixed bag, with three of four regions reporting declines in housing starts, one region (the West) reporting a substantial gain, two regions reporting increased building permits and two reporting declines in permit issuance. But April-May averages reveal significant strength across the board. For the first two months of the second quarter, the pace of housing starts surpassed the first-quarter pace in the Northeast and West and equaled the pace set in the Midwest and South. In terms of building permits, the April-May average surpassed the first-quarter pace in every region.

"Given the solid fundamentals of this marketplace, including relatively thin inventories of unsold units, great house-price performance (for both single-family homes and condos) and excellent demographic projections, we are currently forecasting 1.9 million starts for all of 2004, up about 5 percent from last year,” said NAHB’s Seiders.

Source: NAHB

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