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Housing starts, building permits improve slightly

Although builder confidence rose significantly this month, building permits and housing starts barely improved. The new home sector is starting to recover, but remains fragile and largely dependent upon tight inventories.

construction spending

housing starts

Housing starts improve, albeit slightly

Although housing starts rose very slightly for the month, as did building permits and completed housing units, according to the U.S. Census Bureau and the Department of Housing and Urban Development’s joint residential construction report for May 2013.

Reflecting this week’s report that home builder sentiment regarding new home sales was back to pre-recession levels, housing starts of privately-owned properties rose 6.8 percent in May compared to April, marking a dramatic 28.6 percent increase from May 2012. That said, single-family housing starts only rose 0.3 percent for the month.

Also barely moving were housing completions, as privately-owned housing units rose less that one percent, meanwhile single-family completions rose 4.2 percent for the month, marking a bright spot in the report.

Authorizations of building permits for single-family homes rose 1.3 percent in May, marking the third indicator in the report that fell short of expectations.

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What’s next for new home construction?

Inventory levels remain tight in the residential sector as home values and foreclosure levels improve while housing is steadily improving, but if inventory levels loosen up as Redfin says they already are, new home construction may suffer.

“Lots of homeowners want to sell,” Redfin CEO Glenn Kelman explains. “And lots of people want to buy. The problem has just been agreeing on a price. Over the last 12 months, Redfin agents have talked to plenty of homeowners seeking to test the market at a very aggressive price, just so a sale would yield enough money to pay off the mortgage. Those consultations often ended with a decision to wait. What has changed in the last 60 days is that these owners are now listing, selling — and even appraising — at the price they’ve needed to get all along. People who bought near the peak in 2006 and 2007 — only to get buried in the downturn under a mountain of debt — can now, for the first time in years, see daylight. And they’re running for it.”

Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

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