Data released today showed that a smaller than expected decline in May Housing Starts. Analysts at Wells Fargo point out despite the drop, there were a few rays of sunshine within the report, as prior months’ data were revised higher and also noted single-family permits rose for the first time in six months.
“New residential construction continues to have trouble building momentum despite lower building costs and improved buying conditions. Total housing starts dropped 0.9% during May. A 10.9% rise in volatile multifamily starts was not enough to offset a 6.4% decline in single-family units.”
“Starts remain 5.3% below their prior-year pace on a year-to-date basis. That noted, residential building continues to be fairly solid. The 1.269 million-unit pace hit in May is slightly above the 1.222 million-unit pace averaged over the past six months. Starts for both March and April were also revised higher, and now show 6.8% and 4.4% monthly gains, respectively.”
“A 0.3% rise in total building permits during May also provides some cause for optimism.”
“The gain in permits along with more favorable buying conditions points to gradually improving activity over the summer. That said, lower mortgages rates will not likely be rocket fuel for residential construction, and a surge in activity is unlikely.”