Multi-Family Housing Permits Jump in May
IHS Global Insight has reported that May housing starts rose 3.5% to a 560,000 annual rate and that single-family and multi-family starts increased 3.7% and 2.9%, respectively. Housing permits jumped 8.7% to a 612,000 annual rate with single-family permits increasing 2.5%, and multi-family permits jumping at 23.2%.
According to U.S. Economist Patrick Newport, the key numbers in this report are the permits, not the starts. Permits are better measured than starts, are less influenced by weather, and are a good leading indicator for housing. Single-family permits - the key number in this report - rose 2.5%, to a 405,000 annual rate, the 12th lowest reading on record (data start in 1960). The bottom line: single-family home construction remains stuck near the bottom, and the near-term outlook is for more of the same.
Multi-family permits - the second most important number in the report - jumped 23.2% to a 207,000 annual rate, the highest level since January 2009. Overall, multi-family permits are trending up ever so slightly nationally, and in the West and South. This trend should pick up since the rental market is strengthening - at the expense of the single-family market.
Housing starts increased 3.5% to a 560,000 annual rate (13th lowest reading on record; data start in 1946), and April’s estimates were revised up. Single-family starts increased 3.7% to a 419,999 annual rate (10th lowest reading on record; data start in 1959). Multi-family starts rose 2.9% to a 141,000 annual rate.
According to the Joint Center for Housing Studies report on The State of the Nation's Housing 2011, the number of renters of households increased by 692,000 on average annually from 2006 to 2010, while the number of owner occupied households decreased by 201,011 annually. During this period, the homeownership rate fell from 69% (at the end of 2005) to 66.5% at the end of 2010. This massive shift from owning a home to renting implies that the multi-family market will come back much more quickly than the single-family market.
Source: IHS Global Insight