The monthly report from the US Census Bureau and the Department of Housing and Urban Development shows that new housing starts totaled a seasonally adjusted annual rate of 708,000 units in May, a drop of -4.8% compared to a revised rate of 744,000 in April, and lower than a consensus estimate of 720,000 new starts. April’s revised rate represents the highest number of new housing starts in the US since October 2008.

The good news is that new building permits rose to a seasonally adjusted annual rate of 790,000 in May, the highest total since September 2008. Permits for single-family units rose 4% month-over-month in May, and permits for structures with more than 4 units rose 17.7%.

Year-over-year, single family building permits rose 19.9%, while permits for multi-family structures of more than 4 units rose by 39.3%. Total new permits are up 25% year-over-year in May.

Construction starts rose 28.5% year-over-year, with single family units rising 26.2% and structures with more than 4 units rising 31.6%. Multi-family construction starts were down month-over-month, however, by -24.2%.

Multi-family construction starts are quite volatile, ranging from a high this year of 240,000 in February to a low of 179,000 in May. In May of 2011, multi-family construction starts totaled just 136,000, the lowest total for the past 12 months.

Overall this month’s report is encouraging, but the US economy needs to see an increase in new home sales, not just construction. And that’s been pretty slow in coming.

Paul Ausick

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