Housing starts fall -2.1% in May, while permits rise 3% MoM

In May, single-family starts fell -3.4% MoM, while multi-family starts rose +3.1% MoM. Housing permits saw an even greater dichotomy, with single-family starts falling -1.8% MoM, and multi-family rising +16.5% MoM. Housing under construction fell -1.2% MoM, again single-family led the decline, falling -2.5% MoM, while multi-family rose +1.1% MoM. Housing completed fell -.5% MoM, but the breakdown was counter to the other categories, as multi-family fell -10.4% MoM, and single-family rose +1.5% MoM.

Looking at the actual numbers, housing starts fell to 1474k (consensus 1472k) in May, but the decline was less than expected after April's figure was revised lower to 1506k from 1528k originally. Conversely, new building permits rose more than expected to 1501k in May (consensus 1473k), and were revised higher in April to 1457k, from the 1429k originally reported. Homes under construction fell 15k between April and May, and competed homes fell to 1534k from 1542k the prior month. On a trending basis, all four categories are below their three month averages, indicating further deterioration of the housing market.

Over the last year, housing starts have declined -24.5% YoY, and permits have fallen -22.9% YoY. While both single and multi-family construction has been in decline, single-family has outpaced multi-family in the contraction as single-family starts fell -26.3% YoY, and single-family permits fell -29% YoY. Net, the housing market remains depressed versus a year ago.

Regionally, on a seasonally adjusted basis, the Northeast and Midwest both saw housing starts rise over +15.5% MoM, while the West slide almost 20% MoM (its lowest level since 1996), and the South held relatively steady, only declining by -1.6% MoM. Most of these large move appear to be concentrated in multi-family, as single-family only rose +.9% MoM in the Northeast, and only fell -12.1% MoM in the West. Permits were also quite weak in the West, falling -29% YoY to have the worst annual showing of all the regions.

May's data was in line with expectations, and showed a further decline in housing starts following Aprils huge -7.1% decline. The gap between permits and starts is narrowing. The single-family sector is still clearly in decline, but strength in the multi-family sector may indicate some recovery. Demand is expected to remain weak, as interest rates rise and credit tightens. Residential construction will remain a drag on GDP.