US Housing Starts Fell 8.9% as Building Permits Fell 7.0% in May

US housing starts rose in May came in much lower-than-expected 1549K vs 1701K expected. This is 14.4 percent (+/- 8.9%) below the revised April 2022 estimate of 1,810,000. Building permits 1695K vs 1785K, this is 7.0% below the revised April rate of 1,823,000. This does not auger well for US GDP ahead, Atlanta Fed’s GDPNow model estimated no growth in real GDP in Q2 versus prior forecast for 0.9% growth yesterday. That’s a very sharp slowdown in construction and it came even before the latest spike in interest rates with the Federal Reserve raising 75 basis points yesterday. The key takeaway from the report was the broad-based softness in single-family starts and permits.

The move suggests disruption and demographic influences.

United States Housing Starts May 2022

The keynote from the report was the broad-based softness in single-family starts and permits. Starts declined month-over-month in three of the four geographic regions.

  • Housing starts declined 14.4% month-over-month in May to a seasonally adjusted annual rate of 1.549 million units (consensus 1.730 million)
  • The change in single-unit starts by region: Northeast (+5.5%); Midwest (-5.9%); South (-10.0%); and West (-11.8%).
    Multi-unit starts decreased 23.7% month-over-month while multi-unit permits decreased 9.4% month-over-month.
  • The number of units under construction at the end of the period increased 0.4% month-over-month to a seasonally adjusted annual rate of 1.665 million. That left the Q2 average 4.7% above the Q1 average, so it will be accounted for as a positive input in Q2 GDP forecasts.
United States Housing Starts

The housing market had been supported by low interest rates and increasing demand from people moving away from big cities due to the coronavirus crisis, but the momentum slowed with rising inputs amid supply constraints could limit production to ease a shortage of homes. Homebuilding activity is seen slowing in the coming months, amid rising mortgage rates, supply constraints and higher house prices.

United States Building Permits May 2022

  • Permits declined in all regions with the largest region the South seeing the largest decline in permits.
  • Building permits declined 7.0% month-over-month to 1.695 million (consensus 1.800 million).
  • The change in single unit permits by region: Northeast (-1.6%), Midwest (-2.3%); South (-7.3%); and West (-3.3%).
United States Building Permits

The big question is after the inflation and rates and the economy reopens how much further can housing starts go with the massive disruption and divergence with unemployment and wealth creation and erosion demographics.

Housing Completions

  • Privately‐owned housing completions in May were at a seasonally adjusted annual rate of 1,465,000. This is 9.1 percent (±22.6 percent)* above the revised April estimate of 1,343,000 and is 9.3 percent (±19.0 percent)* above the May 2021 rate of 1,340,000.
  • Single‐family housing completions in May were at a rate of 1,043,000; this is 2.8 percent (±13.6 percent)* above the revised April rate of 1,015,000. The May rate for units in buildings with five units or more was 417,000

Notice of methodology change: Beginning with the January 2022 New Residential Construction release on February 17, 2022, the monthly Building Permits Survey design will change from a representative sample to a cut‐off sample. This change will allow complete local and county data on new housing units authorized by permits to be published on a monthly basis going forward. For additional details on this change and the impact on New Residential Construction, see our FAQ document.

Source: US Census 

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