May Housing Starts Top Consensus

Permits have been flattening but starts have been rising. That's the general trend of the housing starts report where starts in May topped Econoday's consensus range at a 1.269 million annual rate while permits edged past expectations at 1.294 million. The starts data in today's report include big upward revisions to both April and March totaling 77,000.

Residential investment has fallen for five straight quarters but the second quarter for starts is looking positive. Yet the gain is centered in multi-units which pack less GDP punch per pound than the larger single-family category. Starts for single-family homes were actually very weak in May, at an 820,000 annual rate for a 12.5 percent year-on-year decline. Multi-units, in contrast, are up a yearly 13.7 percent at a 449,000 rate.

Total permits are down 0.5 percent year-on-year with single-family data also lagging multi-units here as well. Completions are a major negative in today's report, falling sharply to a 1.213 million rate and not providing new supply to a home sales market that is trying to build momentum.

Still the overall news is good, that starts and permits are moving back to their levels before last year's steep slump. And favorable mortgage rates, which continue to come down, point to the possibility if not likelihood for acceleration in this report in the months ahead.