Home Building Picks Up in May

Groundbreaking for single-family homes edged up 3.2 percent in May, reaching its highest level since December, the Commerce Department reported Tuesday. Single-family construction is now up 26 percent from year ago levels, as the new-home market continues to inch toward recovery. However, the volatile multifamily market bit into the pick-up in single-family construction. Overall housing construction in May dropped 4.8 percent compared to April, pulled down by a 21.3 percent decrease in May in multifamily construction. Still, there’s reason behind home builders’ increasing optimism about the sector: New housing permits--a future gauge of construction--soared nearly 8 percent in May, reaching the highest monthly level since September 2008. Builders’ Feeling More Confident About Recovery Builders’ confidence is gradually building about the market for newly built, single-family homes. Builder confidence rose one point in June and continuing the trend of several months of steady increases, according to the National Association of Home Builders/Wells Fargo Housing Market Index. The index is now at its highest level since May 2007. Builders in the Midwest and West seem to be the most optimistic that the new-home market is improving. The increase in builders’ sentiment is “reflective of the continued, gradual improvement we are seeing in many individual housing markets as more buyers decide to take advantage of today's low prices and interest rates," says Barry Rutenberg, NAHB chairman. However, builders continue to cite overly tight lending conditions and low appraisals as major obstacles in completing sales. Source: “Housing Starts in U.S. Fall 4.8% in May on Apartments,” Bloomberg (June 19, 2012) and National Association of Home Builders