FXStreet (Guatemala) – Mark Vitner, analyst at Wells Fargo explained, that as expected, housing starts fell in May to a 1.04 million unit seasonally adjusted annual pace, while permits unexpectedly surged 11.8 percent.
Key Quotes:
“However, expiring tax credits are likely overstating permit growth.”
“After a huge 22.1 percent increase in April, housing starts fell 11.1 percent in May, pushing the pace of homebuilding down to a seasonally adjusted 1.04 million-unit annual pace. The largest pullback in the month came in the multifamily sector, which dropped 20.2 percent in May alone.”
“Despite the sizable drop, single-family starts are still 5.1 percent higher than a year ago, while multifamily starts are 2.0 percent higher.”
“The year-over-year growth is thanks to the Northeast and the West regions, where starts are 58.0 percent and 32.5 percent higher than a year earlier, respectively. Meanwhile, the South and the Midwest are both down on a year-to-year basis.”
“In the near term, starts should pick up.”
“For one, the monthly decline came on the heels of a surge after severe winter weather plagued homebuilders in the colder months”
“Second, the National Association of Homebuilders’ confidence index for June that was released yesterday surged to its highest level this year. The index also indicated that new home sales have improved, while an increase in homebuyer foot traffic bodes well for future sales. In addition, each census region improved over the month, showing that the better outlook on the new home market is not being driven by just one region.”
“Third, housing permits are now running well ahead of starts. The seasonally adjusted annual rate of building permits was 1.28 million units in May, while housing starts were running at just a 1.04 million unit pace.”
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