Hidden Message in Building Permits Data: Prepare to Rent!

This morning’s Residential Construction report for May, heldrnmuch better news than appeared at first glance even though that first glance wasrnnot bad either.  Permitting andrnconstruction completions were particularly strong in the multi-family area–perhaps even disturbingly strong.</p

The Census Bureau and Department of Housing and UrbanrnDevelopment reported that permits for residential construction jumped 11.8rnpercent from April to a seasonally adjusted annual rate of 1,275,000 units.  The analysts’ consensus was for 1,105,000rnunits.  April’s permitting estimate wasrnrevised down slightly from 1,143,000 to 1,140,000 but even with the revisionrnrepresented a 9.8 percent increase from March. rnThe May permits were 25.4 percent higher than the May 2014 estimate ofrn1,017,000. </p

Single-family permits rose 2.6 percent from April’s estimaternof 666,000 units to 683,000 units, a 9.1 percent increase from a yearrnearlier.  Multifamily permits (for construction of buildings with 5 or more units) were issued at a rate of 557,000 in May, arn26.0 percent increase from April and up 53.9 percent from the previous May. </p

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On a non-seasonally adjusted basis there were 113,300rnpermits issued during the month compared to 104,800 in April.  Single family permits decreased slightly torn62,400 but multi-family permits rose by 10,000 to 47,900.</p

Housing starts were down by 11.1 percent from April to arnseasonally adjusted annual rate of 1,036,000, 5.1 percent above the May 2014rnrate of 986,000. The rate was also below consensus estimates of 1,090,000.  However, the April number, initially reportedrnat 1,135,000 units and a 20.2 percent increase from March was revised upward torn1,165,000, representing a 22.1 month-over-month gain. </p

Single family housing starts were at a rate of 680,000rnunits, down 5.4 percent from the lowered revision (from 733,000 units) of 719,000rnApril starts.  Multifamily starts werernestimated at 349,000 units compared to 428,000 in April. </p

On a non-seasonally adjusted basis there were 96,800 housingrnstarts in May compared to 105,500 in April. rnThere were 65,000 single family starts and 31,100 starts in multi-familyrnbuildings.</p

Housing units were completed at a seasonally adjusted annualrnrate of 1,034,000, an increase of 4.7 percent from April and 14.5 percentrnhigher than a year earlier.  The April estimate,rnwhich had already represented a 20.4 percent increase over March was revisedrnupward slightly from 986,000 to 988,000. </p

Single family completions were at an estimated rate ofrn635,000, down 5.2 percent from April. <bMulti-family units were completed at a rate of 392,000, a 28.1 percentrnincrease from April.</p

On a non-adjusted basis there were 84,900 units of housingrncompleted in May; 52,800 single-family units and 31,600 multi-family units.</p

Bloomberg commented, “The housing starts & permitsrnreport points to solid strength for the housing sector.  Forecasters will be revising theirrnsecond-quarter GDP estimates higher following today’s report, not to mentionrntheir estimates for Thursday’s index of leading economic indicators wherernpermits are one of the components.”</p

At the end of May thee were an estimated 144,000 permitsrnauthorized for which construction had not yet begun and an estimated 863,000rnhousing units under construction.  Anrnestimated 367,000 of those incomplete units are single family and 484,000 arernlocated in multi-family buildings.</p

The Northeast and Midwest accounted for all of the surge inrnpermitting.  The Northeast saw anrnincrease of 77.7 percent from April and 165.8 percent year-over-year.  The Midwest was up 16.3 percent and 3.0rnpercent for the two periods.  Permittingrnin the South was down 3.6 percent from March but remained 4.9 percent higherrnthan a year earlier while permitting slipped 1.9 percent in the West but wasrn14.9 percent higher year-over-year.</p

Starts were down in every region on a monthly basis.  In the Northeast starts fell 26.3 percent followingrna strong gain of 85.9 percent in March but were up 58.0 percent compared to arnyear earlier.  The Midwest saw arnmonth-over-month decrease of 10.2 percent and a yearly loss of 9.7rnpercent.  Starts in the South were downrn5.0 percent from April and 8.7 percent from the previous May and in the Westrnstarts decreased by 12.5 percent for the month but were up 32.5 percent fromrnMay 2014.</p

Completions rose 39.3 percent in the Northeast and were uprn38.1 percent form a year earlier.  In thernMidwest there was a monthly drop of 14.0 percent and completions were unchangedrnfrom the previous May.  Completions rosern4.5 percent in the South and were 16.5 percent higher than in May 2014 and inrnthe West completions were 1.8 percent and 7.9 percent higher than the twornearlier periods.

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