- Housing starts improved in May, rising by 4.3% month-on-month to 974K units (annualized). While this was a fair bit below the consensus forecast for 1.1 million units, it’s the first time in four months that starts increased.
- Multi-unit starts drove the rise last month, picking up by 15% month-on-month. Single unit starts, on the other hand, remained flat at 675K in May.
- By region, housing starts in the West (+69.8%) and Northeast (+12.8%) saw strong rebounds for the month, while the Midwest (-1.5%) and South (-16%) continued to decline last month.
- After contracting by 21.3% in April, permits bounced back in May, increasing by 14.5% m/m. Still, the number of permits was 15% lower than where it was in February.
Key Implications
- With states restarting their economies, we are seeing a number of economic indicators turn around, housing starts was no exception. However, the level of starts remains well off the peak before the crisis reflecting the cautious approach homebuilders are taking given the unprecedented nature of today’s economic environment.
- With mortgage rates at historical lows, and labor market conditions gradually improving, we expect consumers to continue to dip their toes into the housing market. Indeed, mortgage applications for home purchases has improved steadily since April, this will likely fuel more home building activity in the months ahead.
