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06/16/2022

Housing starts topple in May

Single-family starts see a 9.2% decline for the month and a 5.3% drop compared to a year ago.
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Home Builder residential construction

The housing ride might be officially over. 

Housing starts in May fell 14.4% to a seasonally adjusted annual rate of 1.549 million from the revised April rate of 1.810 million.

Total starts in May are also 3.5% below the May 2021 rate of 1.605 million, according to the the latest Monthly New Residential Construction report, released this morning by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

Single-family starts were at a rate of 1.051 million last month, dropping 9.2% compared to the revised April figure of 1.157 million. On a year-over-year basis, single-family starts are down 5.3% compared to the May 2021 rate of 1.110 million in May 2021.

The May rate for units in buildings with five units or more was 469,000, plummeting 26.8% from the previous month.

Rising mortgage rates, inflation, and a lack of affordable homes are keeping potential buyers on the sidelines at this stage of the game. 

Yesterday, the National Association of Home Builders reported that builder confidence in the market for newly-built single-family homes fell two points in June to a reading of 67. The reading, which measures builder confidence, marks the sixth straight monthly decline and the lowest HMI reading since June 2020.

“Single-family home building is slowing as the impacts of higher interest rates reduce housing affordability,” said Jerry Konter, chairman of the NAHB and a home builder and developer from Savannah, Ga. “Moreover, construction costs continue to rise, with residential construction materials up 19% from a year ago."

Privately‐owned housing units permits in May were at a seasonally adjusted annual rate of 1.695 million, dropping 7% from the revised April rate of 1.823 million. 

The latest permits figure is 0.2% above the May 2021 rate of 1.691 million, however. Single‐family authorizations in May were at a rate of 1,048 million down 5.5% from the revised April figure of 1.109 million.

Permits for buildings with five units or more were at a rate of 592,000 in May, decreasing 10% from the previous month and plunging 19.8% compared to May 2021.

"As the market weakens due to cyclical factors, the long-term housing deficit will persist and continue to frustrate prospective renters and home buyers," Konter said.

“In further signs that the housing market is weakening, single-family permits are down 2.5% on a year-to-date basis and home builder confidence has declined for the last six months,” said NAHB Chief Economist Robert Dietz. “Due to the acceleration in construction activity in recent quarters, housing completions are rising. Single-family completions were up 8.5% in May 2022 compared to May 2021 as inventories rise.”

Click here for the full Monthly New Residential Construction report for May 2022.

Here is a breakdown of how housing starts and permits performed regional basis in May 2022 compared to the prior month:

  • In the Northeast, total starts increased 14.6% while single-family starts rose 5.5% above the prior month. Combined permits diminished by 20.2% with single-family permits down 1.6%.
  • In the Midwest, combined starts were up 1.9% as single-family starts declined 5.9%. Permits in the saw a decline of 7.6% with single-family permits slipping by 2.3%.
  • Overall housing starts in the South dropped 20.7 with single-family starts decreasing 10%. Permits declined by 4.7% with single-family permits seeing a 7.3% falloff. 
  • Total stars in the West saw a 17.8% decrease with single-family starts falling 11.8%. Combined permits were down 7.1% with single-family permits falling 3.3%.

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