Housing Starts Solid, Permits Still In Contraction

Housing starts are solid but not permits. Starts did slip 0.3 percent to a 1.164 million annualized rate in May but the trend is positive with the year-on-year gain at a very strong 9.5 percent. Permits, in contrast, popped 0.7 percent higher in the month to a 1.138 million rate but here the year-on-year rate remains deep in the contraction column, at minus 10.1 percent.

Key strengths in the report are in the central category of single-family homes where starts rose 0.3 percent to a 764,000 rate for a year-on-year gain of 10.1 percent. But here too permits are soft, down 2.0 percent in the month though the year-on-year rate is still positive, at 4.8 percent.

Starts for multi-family homes fell 1.2 percent in the month with permits up 5.9 percent. Year-on-year, multi-family starts are up 8.4 percent but permits are sharply lower, at minus 28 percent.

Total permits in the West, which is a key region for developers, spiked 15 percent, putting the year-on-year gain at 20 percent. Permit trends in the Midwest and South are flat while the trend is sharply lower for the nation's most fully developed region, the Northeast.

Construction is busy, at an annualized 1.019 million for the strongest rate of the cycle, since February 2008. And completions were getting done in May, at a 988,000 rate for a 5.1 percent monthly gain.

The housing and constructions sectors are showing bursts of strength and in general are trending higher, providing a highlight for what is mostly a modest outlook for the economy.

Recent History Of This Indicator:
Housing starts bounced back sharply in May but a give back is expected in June, to a consensus 1.150 million annualized rate for what would be a 1.9 percent decline on the month. Housing permits, however, are expected to extend April's gain with a 2.2 percent increase to a 1.140 million rate. Despite strength in construction spending, trends in this report have been weak with starts at a year-on-year minus 1.7 percent in April and permits also in the negative column, at minus 7.2 percent.