Washington, DC, June 18--Builders ramped up the pace at which they started work on new homes and apartments in May to a seasonally adjusted annual rate of 1.73 million units -- up 6.1 percent from the previous month -- the Commerce Department reported today.
Healthy gains in building permits and rising backlogs of unused permits also bode well for future gains in this singularly well-performing sector of the economy.
"After some weather-related delays in April, builders were able to pick up the pace of new construction in May," said Kent Conine, President of the National Association of Home Builders and a home and apartment builder from Dallas. "However, unusually wet weather in much of the East and parts of the Midwest and West likely still kept some construction in check last month, and we could see that activity carry over for additional solid gains in June's report."
Encouraged by strong home buyer demand that is being spurred by low interest rates and solid house-price performance, home builders boosted the pace of single-family housing construction 1.5 percent in May to a seasonally adjusted annual rate of 1.38 million units. Meanwhile, multifamily starts, which traditionally show significant month-to-month volatility, rose 29.2 percent in May to a 354,000-unit rate. In both sectors, the year-to-date construction total is running above last year's excellent pace.
"Today's housing market remains very solid. Our latest surveys show a great deal of confidence among builders regarding their prospects for continuing strong sales of new single-family homes amidst the very favorable financing climate for home mortgages," said NAHB Chief Economist David Seiders. "In addition, rising backlogs of unused permits are a good sign that we'll see even more gains in building activity once certain regions begin to see drier weather conditions."
Regionally, starts rose in the Midwest, South and West in May by 14 percent, 7.4 percent and 0.7 percent, respectively. Only the Northeast posted a decline, of 1.3 percent, which most likely was weather-related.
Issuance of building permits was up 3.7 percent to a seasonally adjusted annual rate of 1.79 million units -- the strongest pace since last December. Single-family permits rose three-tenths of a percent to a rate of 1.34 million units, while multifamily permits rose 15.3 percent to a rate of 452,000 units. The backlog of unused permits rose for the second consecutive month in both components of the market, providing a solid base for starts of new units in June.
"NAHB is still projecting 1.7 million housing starts for all of 2003, which is on par with last year's excellent performance," said Seiders. "The single-family market actually is on track to slightly exceed 2002, while the multifamily component should be off only modestly."
