WASHINGTON - Providing the latest evidence of the ongoing downturn in the nation’s housing market, the U.S. Department of Commerce reported that housing starts declined 3.3 percent to a seasonally adjusted annual rate of 975,000 units in May. This was the lowest total starts number since March 1991. Single-family starts declined 1 percent to a rate of 674,000 units, their lowest since January 1991.
“Builders are doing the right thing by slowing new production in view of the very weak demand in the market and reluctance of prospective buyers to move forward with a purchase at this time,” stated National Association of Home Builders (NAHB) President Sandy Dunn. “Production of new homes won’t pick up until the demand side does, and it’s going to take some decisive policy action on the federal level for that to happen. It’s high time for Congress to move on a housing stimulus package that will substantially bolster our weakened national economy.”
This report “clearly shows that the housing downswing is still underway, with systematic declines in both housing starts and building permits for May,” said NAHB Chief Economist David Seiders. “It also squares with the results of our own builder surveys, which indicate that builders recognize the fundamental weakness on the demand side of the market and are taking the appropriate steps to limit new inventory. Evidence suggests that some pent-up demand is there, but Congress and the administration need to do what they can to help release it. A temporary home buyer tax credit would be just the incentive that many qualified buyers need to go forward with their homeownership plans.”
While single-family starts fell 1 percent to a rate of 674,000 units in May, multifamily starts - which typically display significant month-to-month volatility - sank back 8 percent to a 301,000-unit rate following a substantial uptick in April.
Housing starts fell in three out of four regions in May, with the Midwest posting a 25 percent decline from the previous month, the South posting a 4.4 percent decline, and the West registering a 10.3 percent decline. Only the Northeast posted a gain for the month, with a 61.5 percent boost following a large decline in April.
Building permits, which can be an indicator of future building activity, were down 1.3 percent overall in May to a seasonally adjusted annual rate of 969,000 units. Single-family permits fell 4 percent in the month to a rate of 623,000 units, while multifamily permits rose 3.9 percent to 346,000 units.
Regionally, issuance of building permits was mixed in May, with the Midwest and South reporting declines of 7.6 percent and 8.6 percent, respectively, and the Northeast and West posting respective gains of 30.6 percent and 4.1 percent.
Housing Starts Decline 3.3 Percent in May
June 23, 2008