Monday, May 19, 2014

New-Home Construction, Permits Soar

The Mortgage Corner

Housing starts jumped in April and building permits hit their highest level in nearly six years, offering hope the weak housing market could be stabilizing, according to the US Census Bureau’s April report on housing starts.  This means more homes will be available to make up for the current inventory shortage, the lowest inventory of homes for sale since early 2000.

Groundbreaking for homes surged 13.2 percent to a seasonally adjusted annual pace of 1.07 million units, the highest since November 2013, the Commerce Department said. Ground-breaking for single family homes rose 0.8 percent, while starts for the volatile multi-family homes segment surged 39.6 percent.

The housing starts report suggested building activity would likely continue to rise for some time, according to Inside Debt, as permits to build homes jumped 8.0 percent to a 1.08 million unit pace in April. Permits for single family homes, however, rose just 0.3 percent. Permits for multifamily housing soared 19.5 percent.


Graph: ICAP

A separate report showed consumer sentiment falling in May on worries over income growth, tempering the housing data's upbeat signal on the economy. The news has been good but not consumer sentiment which has softened noticeably so far this month, to 81.8 vs 84.1 in final April and 82.6 vs mid-month April. The latest reading is below the low estimate in the Econoday forecast.

Weakness is split evenly between the composite's two components with expectations down 1.5 points from final April to 73.2 and with current conditions down to 95.1 which is 3.6 points below final April and which signals specific monthly weakness for the run of consumer data for May.


Graph: Econoday

Gas prices are steady and are not affecting inflation expectations which remain stable to lower, at 3.2 percent for 1-year expectations which is unchanged from final April and at 2.8 percent for 5-year expectations which is down 1 tenth.

It's hard to explain the fall off in this report, says Econoday. Job indications are strong led by the big bounce higher in the April employment report and followed by two straight weeks of significant declines in jobless claims. The stock market is making new records and housing prices are strong so far in 2014, two factors that add to consumer wealth. So we see consumer confidence continuing to improve this year as consumers feel more wealthy with a steadily improving housing market.

Harlan Green © 2014

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