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Single family construction improves, multifamily still volatile

Builder confidence is on the rise, as are construction activities, but the volatility of the multifamily sector is having an impact on other sectors.

Permits up, starts down. Why?

According to the U.S. Census Bureau, home builders applied for permits in May to build new homes at a seasonally adjusted annual rate of 780,000, jumping 7.9 percent above April 2012, and 25 percent above May 2011, hitting their highest rate since September 2008. The increase in permits echoes the increase in builder confidence during the month of May which was at its highest level in five years.

There is a growing disparity, however, between the improving single family sector and the increasingly volatile multifamily sector as actual housing starts for single family rose 3.2 percent for the month while multifamily took a 24.2 percent dive. Overall, housing starts increased 2.85 percent over the year when looking at both sectors together.

Privately-owned housing completions in May were at a seasonally adjusted annual rate of 598,000, down 10.3 percent from April, but up 10.1 percent from May 2011. Again, the disparity between single family and multifamily is clear, as single family completions fell 6.3 percent for the month, while multifamily fell 25.7 percent for the month.

Is this good news or bad news?

Although housing starts were below expectations and pulled down by the multifamily sector, single family starts rose, and permits jumped, showing strength for the new home sector. Additionally, the Census Bureau revised previous months up, showing previously unseen signs of strength in housing.

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“This month’s modest uptick in builder confidence comes on the heels of a four-point gain in May and is reflective of the continued, gradual improvement we are seeing in many individual housing markets as more buyers decide to take advantage of today’s low prices and interest rates,” said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, FL in response to the recent news of improving builder confidence.

While builders remain cautious with their optimism, and do not see the sector as healthy, inventory levels are looking good, and despite continued tight lending, and fierce competition from the foreclosure homes pulling down pricing, builders are building up to an autumn that we haven’t seen for some time, which could not only include more starts and completions, but actual sales.

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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