Total housing starts fell from 1.810 million in April to 1.549 million annually in May, a 14.4 percent immersion. From a year ago, total start-ups fell 3.3 percent. Total housing permits also fell in May, down 7.0 percent from 1.823 million in April to 1.695 million. Total permits are still 0.2 percent higher than the May 2021 level.
Starts in the dominant single-family segment posted a rate of 1.051 million in May vs. 1.157 million in April, down 9.2 percent and 5.3 percent less than a year earlier (see first chart). Single-family permits fell 5.5 percent to 1.048 million from 1.109 million in April (see first chart).
Multi-family structures with five or more units started 26.8 percent lower at 469,000 and closed 3.3 percent lower than last year, while two- to four-family-unit segments jumped 141.7 percent to 29,000-unit growth compared to April 12,000. Collectively, the multifamily start was up from 23.7 percent in May to 498,000 and is up 0.6 percent from a year earlier (see first chart).
Multi-family permits for groups of 5 or more fell 10.0 percent to 592,000, while permits for two- to four-unit units fell 1.8 percent to 55,000. Collectively, the multifamily permit was 647,000, down 9.4 percent for the month but up 17.0 percent from a year earlier (see first chart).
Meanwhile, the National Association of Home Builders Housing Market Index, a measure of home builder sentiment, declined again in June, coming in at 67 vs. 69 in May. This is the sixth consecutive fall and the lowest reading since June 2020. The index fell sharply from its recent high of 84 in December 2021 and 90 in November 2020. Rising mortgage rates, rising home prices and declining consumer sentiment are weakening demand while higher input costs, excluding wood, are a major concern for manufacturers (see Chart 2).
All three components of the housing market index declined again in May. The expected single-family sales index fell to 63 from 61 in the previous month, the current single-family sales index fell from 78 to 77 in May, and the potential buyer index traffic has plunged again, from 53 to 48 in the previous month. Month (see second chart).
Input costs are still a concern for manufacturers, although timber prices have fallen sharply recently. Lumber recently made about $ 560 transactions per 1,000 board feet in mid-June, down from about $ 1,700 in May 2021 and $ 1,500 in early March 2022. Other input elements like copper were slightly lower but still সাথে 9,200 per metric (per metric) with copper (third chart). High input costs will continue to put pressure on builders’ profits.
Mortgage rates have risen recently, with the 30-year fixed-rate mortgage rate falling to 5.25 percent in mid-June, which is almost twice as low as in early 2021 (see Chart 4).
While the implementation of permanent remote work arrangements for some employees may have provided continued support for housing demand, record-high home prices combined with rising mortgage rates and declining consumer sentiment are working to weaken demand. Pressure on housing demand combined with higher input costs is drowning out the attitude of homebuilders. The outlook for housing is rapidly deteriorating.
Robert Hughes
Robert Hughes joined AIER in 2013 for over 25 years researching economic and financial markets on Wall Street. Bob previously headed Brown Brothers Harriman’s Global Equity Strategy, where he developed an equity investment strategy that combines top-down macro analysis with bottom-up fundamentals.
Prior to BBH, Bob was a senior equity strategist at State Street Global Markets, a senior economic strategist at Prudential Equity Group, and a senior economist at Citicorp Investment Services and a financial markets analyst. Bob holds an MA in Economics from Fordham University and a BS in Business from Lehigh University.