Total housing starts in the US increased in May with gains in both the single-family and multifamily sectors. Starts increased +5% month-over-month to a 1.35 million seasonally adjusted annual rate, according to a joint data release June 19 from the US Census Bureau and HUD. This pace is a post-recession high.

The rate of single-family starts, which accounts for the largest share of the housing market, was +3.9% higher in May, reaching a 936,000 annual rate. Recent growth trends for single-family starts match ongoing healthy levels of the NAHB/Wells Fargo Housing Market Index, now registering a score of 68. However, builders continue to report concerns about ongoing labor access issues and dramatic price increases for softwood lumber.

Recent price increases for lumber are adding about US$9,000 in price per newly-built single-family home.
On a year-to-date basis, single-family starts are +9.8% higher as of May relative to the first five months of 2017. However, single-family permits, a useful indicator of future construction activity, declined -2.2% in May.

Difference Between US New Housing Units Completed and New US Household Formations: 1Q 2018

GRAPH CREDIT: [ US Census Bureau and HUD, First American Financial Corporation, via Business Insider]

Building permits fell -4.6% to a rate of 1.301 million units, the lowest level since September 2017.

US existing-home sales meanwhile decreased -0.4% in May to a level -3% below a year ago, and sales have now decreased year-over-year for three consecutive months. The first-time buyer share of 31% was down from 33% last month and a year ago. The National Association of Realtors reported June 20 that 58% of US homes sold last month were on the market less than a month, up from 57% last month. The May inventory increased +2.8%, but remains 6.1% below the level a year ago, and has decreased for 36 consecutive months on a year-over-year basis. At the current sales rate, the May unsold inventory represents a 4.1-month supply, down from a 4.2-month supply a year ago. May existing sales reached a seasonally adjusted rate of 5.43 million units, compared to 5.45 million in April

Elsewhere, in May, the US median price of a previously owned homes rose to a record US$264,800, NAR data showed Tuesday.

US Real Estate Market: 1Q 2018

Total US housing starts increased in May with gains in both the single-family and multifamily sectors, said Census Bureau and HUD.

Permits to build single-family homes fell -2.2% in May to a pace of 844,000 units, also the lowest level since September 2017. With permits lagging starts, single-family homebuilding could slow in the months ahead, suggested the National Association of Home Builders on the Eye on Housing blog.
Multifamily starts (5+ unit production) were up +11% in May to a 404,000 annual rate. Multifamily construction activity has outperformed our forecast thus far this year. On a year-to-date basis, 5+ unit production is up more than +13% compared to this time in 2017.

Residential investment contracted in the first quarter. The housing market continues to lag overall economic growth, which appears to be accelerating in the second quarter after hitting a speed bump at the start of the year.

US Existing Home for Sale Inventory : May 2018

GRAPH CREDIT: [Calculated Risk]

Key takeaways

• This is +5% above the revised April estimate of 1,286,000 and is +20.3% above the May 2017 rate of 1,122,000.
• Single-family housing starts in May were at a rate of 936,000; this is +3.9% above the revised April figure of 901,000.
• Privately-owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 1,301,000.
  • This is -4.6% below the revised April rate of 1,364,000, but is +8% above the May 2017 rate of 1,205,000.
• Privately-owned housing completions in May were at a seasonally adjusted annual rate of 1,291,000.
  • This is +1.9% above the revised April estimate of 1,267,000 and is +10.4% above the May 2017 rate of 1,169,000.

Realtors estimate that housing start and completion rates need to be in a range of 1.5 million to 1.6 million units per month to plug the inventory gap, said Reuters June 19.

The stock of housing under construction edged up +0.2% to 1.127 million units, the highest level since July 2007. Single-family homes under construction last month increased +0.2% to 515,000 units, the highest level since May 2008.

Elsewhere, US total home sales unexpectedly fell in May as an acute shortage of properties on the market pushed house prices to a record high. The National Association of Realtors said Wednesday that existing home sales slipped -0.4% to a seasonally adjusted annual rate of 5.43 million units last month. It was the second straight monthly decline in sales.

April’s sales pace was revised down to 5.45 million units from the previously reported 5.46 million units.

Sales rose in the Northeast, which accounts for a small fraction of the market. They fell in the West, South and Midwest.
Existing home sales, which make up about 90% of US home sales, dropped -3% on a year-on-year basis in May. They have declined on that basis for three straight months.