Housing Starts Jump in May Amid Flagging Builder Confidence

The Commerce Department reported housing starts rose to a seasonally adjusted annual rate of 1.35 million, the strongest pace since July 2007. Yet a second straight monthly drop in permits foreshadows housing market activity could remain moderate.

WASHINGTON — Housing starts in the United States climbed to a near 11-year high in May as single-family and multifamily home construction accelerated amid a drop in permits, which are a sign of future housing production activity.

Housing starts in May were at a seasonally adjusted annual rate of 1.35 million, the Commerce Department announced this week, exceeding the forecast among economists surveyed by MarketWatch for a 1.3 million pace.

This marked the fastest annual pace for home builders breaking ground on new construction since July 2007. The pace was 5% higher than April and 20.3% higher than a year ago.

Privately-owned housing completions in May were at a seasonally adjusted annual rate of 1.29 million, a 1.9% increase above the revised April estimate of 1.27 million and more than 10% above the May 2017 rate of 1.17 million. Single-family housing completions in May registered at 890,000 for an 11% increase above the revised April rate of 802,000.

Regionally, the Midwest led the nation with a 62.2% increase in combined single- and multifamily housing starts. Starts fell 0.9% in the South, 4.1% in the West and 15% in the Northeast.

While overall housing production numbers increased, overall permits fell 4.6% to 1.3 million units in May. Single-family permits fell 2.2% to 844,000 while multifamily permits fell 8.7% to 457,000.

According to the National Association of Home Builders (NAHB), builder sentiment fell 2 points to 68 in June. The NAHB/Wells Fargo Housing Market Index stood at 66 last June. A reading above 50 is considered positive sentiment.

Builder sentiment has been mostly in the 70s since December, except for one dip in April, when mortgage rates took a sizable jump. The dip in builder sentiment is centered on a spike in material prices, according to NAHB, with builders increasingly concerned that tariffs placed on Canadian lumber and other imported products are hurting housing affordability. As an example, record-high lumber prices have added nearly $9,000 to the price of a new single-family home since January 2017.

“Ongoing job creation, positive demographics and tight existing home inventory should spur more single-family production in the months ahead,” NAHB Chief Economist Robert Dietz states in an announcement. “However, the softening of single-family permits is consistent with our reports showing that builders are concerned over mounting construction costs, including the highly elevated prices of softwood lumber.”

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About the Author


Although Bosch’s name is quite familiar to those in the security industry, his previous experience has been in daily newspaper journalism. Prior to joining SECURITY SALES & INTEGRATION in 2006, he spent 15 years with the Los Angeles Times, where he performed a wide assortment of editorial responsibilities, including feature and metro department assignments as well as content producing for latimes.com. Bosch is a graduate of California State University, Fresno with a degree in Mass Communication & Journalism. In 2007, he successfully completed the National Burglar and Fire Alarm Association’s National Training School coursework to become a Certified Level I Alarm Technician.

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