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New home construction increases in May; outpacing new home sales by 60 percent

New construction dn-3

The U.S. Census Bureau and US Department of Housing and Urban Development (HUD) issued their report on New Residential Construction for May 2011 showing a 2.5 percent increase in single-family home building permits from the month before, and a 3.7 percent increase in new home starts compared to the month before.

The report shows the following new home construction activity for May 2011:

  • Building permits issued for single-family residences were at an annual rate of 405,000 homes which is 2.5 percent above the prior month and a decrease of 6.9 percent from a year before.
  • Housing starts for single-family residences were at an annual rate of 419,000 which is an increase of 3.7 percent from the prior month and a decrease of 8.9 percent from a year before.
  • Homes completed were at a rate of 431,000 homes, an increase of 2.9 percent from the prior month and a decrease of 16.6 percent from a year before.

As I say every month, we need to remember that all the numbers above are “seasonally adjusted” annual rates and the year over year comparisons are just comparing the numbers for the current month versus the a year before. Another way I like to look at where things stand is to simply look at the year to date data; actual numbers, not seasonally adjusted, compared to last years ytd numbers at this same time. I think this may give a little better comparison so those numbers are below:

  • For 2011 there have been 166,700 permits issued for new homes compared with 202,400 this time year for a decrease of 17.6 percent.
  • For 2011 there have been 168,500 new homes started compared with 211,100 this time last year for a decrease of 20.2 percent.
  • For 2011 there have been 158,100 new homes completed compared with 184,200 this time last year for a decrease of 14.2 percent.

Let’s do one of my favorite things and look at the raw numbers and not seasonally-adjusted numbers to compare construction activity to sales:

  • In the 12 month period through April 2011 (the most recent period sales data is available for) there were 297,000 new homes sold and there were 477,200 new homes completed, outpacing sales by 60.3 percent.

Not to be gloom and doom, but I think reality is that it is going to be quite a while, years in fact, before we see new home construction activity back up to historic normal levels. I say this because the supply is still outpacing demand, and demand is not going to pick up significantly until the glut of foreclosures and short sales that are bringing prices down, fall to levels that do not impact home prices in the manner they are today.

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