- Stan Shipley, an economist at Evercore ISI
US housing starts declined in May following a hefty increase the preceding month. However, a surge in building permits to a near the highest level in eight years suggested the pullback was temporary and indicated underlying strength in housing. Construction started on new homes plunged 11.1% to an annual rate of 1.04 million in May, following an upwardly revised April's figure of 1.17 million-unit rate, the highest since November 2007. The median estimate of economists called for 1.09 million. Starts for single-family homes dropped 5.4% to an annual rate of 680,000, while starts in buildings with at least five units plummeted 18.5% to a pace of 349,000.
However, permits for future construction surged 11.8%, the most since December 2010, climbing to 1.275 million last month. Much of the increase was attributed to the multi-family component, with permits soaring 26% to 557,000 to the highest level since January 1990, while single-family permits rose 2.6% to 683,000. Economists predict that the housing market strength will take up some of the slack of the struggling manufacturing sector and support economic growth this year. Earlier in the week, the National Association of Home Builders' reading on builders' confidence rose to the highest level since the end of the Great Recession, adding to signs residential investment should continue to improve.
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