EmailNew housing starts increased from an upwardly revised 541,000 (from 523,000) in April to 560,000 in May. The Briefing.com consensus expected housing starts to fall to 540,000.
Unfortunately, the positive housing starts surprise only masks a continued downtrend in the industry.
The number of homes currently under construction slipped to 418,000 in May from 419,000 in April. The unexpected boom in May starts was not enough to offset the number of completions.
As a result, the housing starts level suggests that builders are actively trying to maintain a steady, but slightly downward trending, supply of new inventories. Thus, the surge in starts is actually counterintuitive. Instead of representing an increase in expected demand for new homes, it actually provides further evidence that home purchases are expected to wane.
Building permits increased from 563,000 in April to 612,000 in May, the highest point since reaching 630,000 in December 2010. The consensus expected permits to fall to 548,000.
The increase in permits came mainly from positive growth in multi-family structures. This suggests that builders may be looking at apartment/condo complexes as an important source of future demand.
