For the first time since U.S. home construction collapsed in March, the sector rebounded in May after steep declines caused by COVID-19 shutdowns, according to the U.S. Census Bureau and the Department of Housing and Urban Development.
Building permits in May increased by 14.4 percent at a seasonally adjusted annual rate of 1,220,000 compared to 1,066,000 permits issued in April, the two agencies said in data released Wednesday (June 17).
But last month’s numbers are 8.8 percent below the May 2019 rate of 1,338,000.
“Home construction activity is beginning to slowly reawaken, just two months after the industry experienced an unprecedented decline in activity,” said Matthew Speakman, an economist at Zillow, wrote. “Builder confidence has rebounded sharply in recent weeks, buoyed by a surprising increase in April new home sales, record-low mortgage rates that help stretch buyers’ budgets and a potentially enduring appetite among buyers for new, never-lived-in homes.”
Housing starts in May were 974,000, a 4.3 percent rise above the revised April figure of 934,000, but that is 23.2 percent below the May 2019 rate of 1,268,000. Single-family housing starts in May were at a rate of 675,000, up 0.1 percent above the revised April figure of 674,000.
Housing completions in May were at a seasonally adjusted annual rate of 1,115,000. This is 7.3 percent below the revised April estimate of 1,203,000 and 9.3 percent below the May 2019 rate of 1,230,000. Single-family housing completions in May were at a rate of 791,000, which is 9.8 percent below the revised April rate of 877,000. The May rate for units in buildings with five units or more was 310,000.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index survey of builder confidence released Tuesday (June 16) showed a record jump of 21 points in June to a reading of 58. Any reading above 50 indicates a positive market.
“As the nation reopens, housing is well-positioned to lead the economy forward,” said NAHB Chairman Dean Mon, a home builder and developer from Shrewsbury, N.J., in a statement. “Inventory is tight, mortgage applications are increasing, interest rates are low and confidence is rising. And buyer traffic more than doubled in one month even as builders report growing online and phone inquiries stemming from the outbreak.”
Still, some analysts say any rebound in housing may not come as quickly as the industry hopes.
“We look for strong demand, improving homebuilder confidence and an ongoing shortage of supply to support growth in housing starts over the rest of the year,” Nancy Vanden Houten, an economist at Oxford Economics, told the Associated Press. “But we still expect starts to be down on average across 2020 overall.”