Builders Still Cautious on Adding More Inventory

June 18, 2014

Builders worked on fewer single-family houses, condos, and apartments last month as housing starts fell 6.5 percent in May to a seasonally adjusted annual rate of just over 1 million units, the U.S. Department of Housing and Urban Development and U.S. Census Bureau reported Tuesday. 

While housing starts have risen 9.4 percent over the past year, apartments have accounted for most of the gains this year.

"The dip in single-family production shows builders continue to move carefully in adding inventory," says Kevin Kelly, chairman of the National Association of Home Builders. "They are also facing supply chain issues, such as access to lots and labor."

Broken out, single-family housing starts fell 5.9 percent in May, while the volatile multifamily market dropped 7.6 percent last month.

While building slowed in May, single-family permits, a gauge of future home building, increased 3.7 percent in May, offering expectations for a looming increase in construction

"The modest increase [in single-family permits] is evidence that builders expect continued release of pent-up demand and a gradual expansion of the housing market,” says David Crowe, NAHB’s chief economist. “We are still forecasting a 12 percent increase in total housing starts for the year."

The South was the only region in May to post an increase in single-family and multifamily housing production, with a 7.3 percent gain recorded compared to the previous month. Meanwhile, housing starts dropped in the Northeast by 25.2 percent in May; the Midwest saw starts drop by 16.5 percent; and the West recorded a 16.3 percent drop in starts.

Source: National Association of Home Builders and “Housing Starts Fall as Consumers Struggle with Costs,” The Associated Press (June 17, 2014)

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