May 2023 Residential Permits, Starts and Completions

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Builders started construction of privately-owned housing units in May at a seasonally adjusted annual rate (SAAR) of 1,631,000 units (1.405 million expected). This is 21.7% (±14.8%) above the revised April estimate of 1,340,000 (originally 1.401 million units) and 5.7% (±10.8%)* above the May 2022 SAAR of 1,543,000 units; the not-seasonally adjusted YoY change (shown in the table above) was +7.5%.

Single-family housing starts in May were at a SAAR of 997,000; this is 18.5% (±14.1%) above the revised April figure of 841,000 units (-5.0% YoY). Multi-family: 634,000 units (+27.1% MoM; +35.1% YoY).

* 90% confidence interval (CI) is not statistically different from zero. The Census Bureau does not publish CIs for the entire multi-unit category.

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Total completions were at a SAAR of 1,518,000. This is 9.5% (±12.3%)* above the revised April estimate of 1,386,000 (originally 1.375 million units) and 5.0% (±13.0%)* above the May 2022 SAAR of 1,446,000 units; the NSA comparison: +5.3% YoY.

Single-family completions were at a SAAR of 1,009,000; this is 3.9% (±13.9%)* above the revised April rate of 971,000 units (-3.3% YoY). Multi-family: 509,000 units (+22.7% MoM; +27.5% YoY).

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Total permits were at a SAAR of 1,491,000 units (1.433 million expected). This is 5.2% above the revised April rate of 1,417,000 (originally 1.416 million units) but 12.7% below the May 2022 SAAR of 1,708,000 units; the NSA comparison: -8.5% YoY.

Single-family permits were at a SAAR of 897,000; this is 4.8% above the revised April figure of 856,000 units (-8.6% YoY). Multi-family: 594,000 units (+5.9% MoM; -8.5% YoY).

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Press release from NAHB’s Robert Dietz:

“Solid demand, a lack of existing inventory and improving supply chain efficiency helped shift builder confidence into positive territory for the first time in 11 months.

“Builder confidence in the market for newly built single-family homes in June rose five points to 55, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This marks the sixth straight month that builder confidence has increased and is the first time that sentiment levels have surpassed the midpoint of 50 since July 2022.

“A bottom is forming for single-family home building as builder sentiment continues to gradually rise from the beginning of the year. This month marks the first time in a year that both the current and future sales components of the HMI have exceeded 60, as some buyers adjust to a new normal in terms of interest rates. The Federal Reserve nearing the end of its tightening cycle is also good news for future market conditions in terms of mortgage rates and the cost of financing for builder and developer loans. Nonetheless, access for these loans has become more difficult to obtain over the last year, which will ultimately result in lower lot supplies as the industry tries to expand off cycle lows.

“Housing is critical for the inflation outlook and the future of monetary policy. Shelter cost growth is now the leading source of inflation, and such costs can only be tamed by building more affordable, attainable housing – for-sale, for-rent, multifamily and single-family. By addressing supply chain issues, the skilled labor shortage, and reducing or eliminating inefficient regulatory policies such as exclusionary zoning, policymakers can play an important and much-needed role in the fight against inflation.

“In another sign of gradual optimism for the state of demand for single-family homes, the June HMI survey shows that overall, builders are gradually pulling back on sales incentives:

• 25% of builders reduced home prices to bolster sales in June.  The share was 27% in May and 30% in April.  It has declined steadily since peaking at 36% in November 2022.
• The average price reduction was 7% in June, below the 8% rate in December 2022.
• 56% of builders offered incentives to buyers in June, slightly more than in May (54%), but fewer than in December 2022 (62%).”

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.