INDICATOR: May Housing Starts and Permits
KEY DATA: Starts: up 6.8%; Year-to-Date: up 28.1%; Permits: down 3.2%
IN A NUTSHELL: "With builder confidence jumping, home construction should continue to improve despite the recent increase in mortgage rates."
WHAT IT MEANS: Housing continues to be the leader of the pack (vroom, vroom). Housing starts increased solidly in May. The notoriously volatile multi-family segment rebounded sharply from a huge decline in April. To put that into numbers, there was a 32% drop in April followed by a 22% rise in May. Get the picture? That is not to say there aren't some big changes in the single-family segment as well but large apartment/condo buildings don't get started willy-nilly. Regionally, the gains were not particularly well distributed. Construction moderated in the Northeast and Midwest but improved in the South and Midwest. Looking forward, home building is likely to jump over the next few months. Yes, permit requests fell in May but for the past two months, permits are running about nine percent above actual building levels. That means the number of home permitted but not started is rising and since homebuilders are not paying out the money for permits for fun, they should be using them soon. Indeed, yesterday the June National Association of Home Builders/Wells Fargo Home Builder Index was released and for the first time in seven years, more respondents indicated conditions are good rather than poor. This surge in positive outlook is being driven by more traffic and the expectation that sales will be stronger going forward. That can only mean those unused permits will turn into new homes pretty soon.