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Home starts continue to disappoint

Home construction activity flagged in May despite what analysts say are widespread shortages of affordable homes.

New-home building was at an annual pace of 1.09 million, down 5.5 percent over the April level and 2.4 percent from the pace a year ago, the U.S. Census Bureau reported. Single-family starts also slid in the month to an annual pace of 794,000, down 3.9 percent from the April level. Single-family starts were still up by 8.5 percent compared to the pace a year earlier, however.

starthome(1)Multifamily starts also dropped off significantly, with starts running at an annual pace of 284,000. That was 9.8 percent lower than the April level and down nearly 26 percent from a year earlier.

Permitting activity also fell, which doesn’t bode well for building activity in the early summer.

The May figures disappointed housing analysts, who have said that new-home completions have far undershot the demand.

 “Housing shortages look to intensify and may well turn into a housing emergency if the discrepancy between housing demand and housing supply widens further,” National Association of Realtors Chief Economist Lawrence Yun said. Yun called May’s drop “befuddling” given the demand for homes and strong gains in jobs.

“One thing that moving up is the housing costs for consumers: higher home prices and higher rents,” Yun said.

Regionally, single-family home building was down year over year by 3.6 percent in the Northeast and 0.5 percent in the West, but was up by 29 percent in the Midwest and by 22 percent in the West, according to the Census data.  

Some analysts say that the annual pace of single-family home building needs to increase by an additional 200,000-250,000 units annually to a rate that exceeds 1 million units.

 “The market for existing homes continues to tighten as millennial household formation grows,” said Mark Fleming, chief economist for the First American Corp. “Yet, existing homeowners are prisoners in their own homes as rates rise and make moving more costly and the fear of not being able to find something hinders the decision to sell.” 


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