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New Home Permits Drop Almost 10 Percent in May; New Home Starts Drop 17 Percent

New construction dn-3

The U.S. Census Bureau and US Department of Housing and Urban Development (HUD) issued a their report on New Residential Construction for May 2010 showing a decrease in building permits and a decrease in new home starts from April.

The report shows the following:

  • Building permits issued for single-family residences in May were at an annual rate of 438,000 which is 9.9 percent below the revised April rate of 486,000 and an increase of 3.1 percent from a year ago when the rate was 425,000.
  • Housing starts for single-family residences in May were at an annual rate of 468,000 which is a decrease of 17.2 percent from April’s revised rate of 565,000 and an increase of 15.3 percent from a year ago.
  • Homes completed in May were at a rate of 507,000 homes, down 7.8 percent from April’s rate of 550,000 homes and an increase of 2.4 percent from a year ago.

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 May 2010 versus May 2009. 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:

  • Through May 2010 there have been 202,600 permits issued for new homes compared with 156.900 this time last year for an increase of 29.1 percent.
    • In May there were 50,600 permits issued, an increase from April’s 35,000 permits.
  • Through May 2010 there have been 211,700 new homes started compared with 152,900 this time last year for an increase of 38.5 percent.
    • In May there were 45,100 new homes started, a decrease from April’s 52,300 new starts.
  • There have been 183,700 new homes completed through May 2010, compared with 199,200 this time last year for a decline of 7.8.
    • In May there were 42,400 new homes completed, a slight decrease from April’s 43,000 completions.

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:

  • Through the end of April, 2010 (the most recent period sales data is available for) there have been 137,000 new homes sold and there have been 141,300 new homes completed, outpacing sales by a modest 3.1 percent.
  • Through the end of April there have been 166,600 new homes started outpacing the new ytd home sales activity through April by 21.6 percent.

I think most people fully expected building permits and starts to drop in May after the spike in the prior couple of months as a result of the home-buyer tax credit deadline to purchase of April 30th. Since starts and permits are still outpacing home sales I still have concern that there is too much optimism out there and an expectation that demand for new homes is going to increase soon which I don’t think is in the cards. I think until the foreclosure and mortgage delinquency rates start subsiding, and the inventory of foreclosures and REO’s on the market (and on the banks books) has bled off, we won’t be seeing much of an increase in demand for new homes.

 

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