Most of the signs are positive that the housing market is finally headed in the right direction, but we’ve been fooled before.
Sales of newly built, single-family homes rose 7.6 percent in May to a seasonally adjusted 369,000 units, according to the HUD and the U.S. Census Bureau. David Crowe, chief economist for the National Association of Home Builders called the increase “a welcome sign that the market has returned to a more solid growth path following lackluster reports in March and April.” He said the rise is in keeping with NAHB’s expectations for continued steady improvement through the end of the year.
Meanwhile, Barry Ruttenberg, chairman of the group said that the increase shows that more home buyers are being drawn to the market by today’s excellent mortgage rates.
Not all areas of the country were the beneficiaries of the good news. While the Northeast and South posted solid gains of 36.7 and 12.7 percent, respectively, the Midwest and West posted declines of 10.6 and 3.5 percent.
Also promising was the report that showed single family housing production increased for a third consecutive month, with builders also pulling more permits for both single and multifamily construction in May. The data showed that the seasonally adjusted annual rate of single family starts rose 3.2 percent to 516,000 units, the best since December 2011.
Ruttenberg said the report is a good sign that builders are cautiously moving to replenish their depleted inventries on single family homes in response to increasing buyer demand.
Actually, overall housing starts posted a 4.8 percent decline in May to a seasonally adjusted rate of 708,000 units, but all of the decrease was on the more volatile multifamily side, which declined 21.3 percent to 192,000 units.
However, there were strong gains in new permit activity for both categories. The combined number was up 7.9 percent to a seasonally adjusted rate of 780,000 units, the strongest showing since September 2008. Single family permits were up 4 percent to 494,000 units (the best pace since March 2010) while multifamily permits rose 15.3 percent to 286,000 units.
As you might expect, builder confidence for newly built single- family homes rose in June, but only a modest one percent, to 29, still miles away from the 50-point level where more builders are positive than not. The tiny increase came on the heels of a four-point increase in May.
‘While the June Housing Market Index is in keeping with our forecast for gradually increasing single family home sales this year, recent economic reports that have shown some weakening in the pace of recovery likely factored into the marginal gain,” said economist Crowe.
In the market for previously owned homes, sales dropped 1.5 percent from April to May, according to the National Association of Realtors. However, nationwide sales are up 9.6 percent from May 2011. The national median, or middle, sale price for an existing home was $182,000 in May, up 7.9 percent from a year ago. The May 2012 seasonally adjusted home sales figure was 4,550,000.
The monthly drop reflected tight inventory rather than softer demand, NAR said, and added that the normal upturn in inventory did not occur this spring. The result is a shortage of properties for sale. That, experts say, is partly because some potential buyers are keeping their homes off the market in hopes of garnering higher prices in the future.
At the end of May, there was a 6.6 month supply of homes for sale, slightly higher than April but 20 percent lower than levels a year ago.
In the overall construction market, May building starts retreated 16 percent from the previous month. In March the gain was 23 percent and in April, 11 percent.
Residential building increased eight percent in May to an annual rate of $158.9 billion, while non-residential construction starts climbed 12 percent in May to a rate of $153.8 billion. A category called nonbuilding construction, which includes electric utilities, saw starts plunge 47 percent, which accounted for the overall decline.