Housing units started by the nation's home builders surged by 11.6% in May to a seasonally-adjusted annual rate of 1.73 million units, according to Commerce Department figures released in June. Both the single-family and multi-family components of the market posted large increases, and every region of the country recorded solid gains in housing production.
“It's good to see that the housing market is back up to its first-quarter pace after some slippage in March and April — the ‘payback months’ following unusually good weather conditions which spurred exceptionally strong production in the first part of the year,” said Gary Garczynski, a builder/developer from Woodbridge, Va., and president of the National Association of Home Builders (NAHB). “Housing is still doing its part to keep the economic recovery going forward.”
Garczynski attributed the impressive rebound largely to favorable interest rates on home mortgages. Rates on long-term contracts averaged 6.8% in May, and have since edged downward to 6.7%, while adjustable-rate mortgages (ARMs) have been available for less than 5%.
“With a financing climate that good, many potential home buyers are being encouraged to take the leap — especially in view of strong house-price performance that has bolstered the investment potential of homes at a time when investments in the stock market have been performing badly,” he said. He said NAHB's latest survey of home builders confirms that demand for new homes is holding firm in June.
Single-family housing starts rose 9.6% to a seasonally-adjusted annual rate of 1.39 million units in May, their highest rate since February. Meanwhile, multifamily starts rose 20.3% to a rate of 344,000 units, partially offsetting a big dip in the previous month.
Regionally, starts rose across the board in May, posting double-digit gains of 22.4% in the Northeast, 24% in the Midwest and 10% in the West. The South, which is the nation's largest housing market, registered a solid 6% gain.
Housing permits, which can be an indicator of future building activity, also rose in May, by 2.6% overall to a seasonally-adjusted annual rate of 1.67 million units. Single-family permits rose a modest 0.7% to 1.27 million units, while multifamily permits rose 9.1% to 407,000 units. Total housing permits rose in all regions but the Midwest, which registered a decline of less than 1%.
“While we may see some tapering off from this high rate of housing production in months to come, it's clear that the housing component of Gross Domestic Product is still providing good support to the budding economic recovery,” said NAHB Chief Economist David Seiders. NAHB is currently forecasting about 1.64 million units for 2002 as a whole, up 2.5% from the strong 1.60 million-unit pace recorded for last year.