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Housing starts are still low, but jump in permits suggest builders are planning

Homebuilders may not be breaking ground, but they appear to be getting ready for work

Housing construction hasn’t recovered to pre-pandemic levels yet, but more permits were issued last month than expected. (Credit: iStock)
Housing construction hasn’t recovered to pre-pandemic levels yet, but more permits were issued last month than expected. (Credit: iStock)

The latest federal numbers show that homebuilders are planning more construction than expected, but actual construction is lagging.

The Commerce Department reported this week that construction permits rose 14.4 percent month-over-month in May, above economists’ 10.8 percent projection, according to the Wall Street Journal.

Housing starts however were up just 4.3 percent, well below the 22.3 percent projected and nowhere near enough to make up for April 26.4 percent decline in starts brought on by the coronavirus pandemic.

Work started on around 974,000 projects nationwide last month, compared to 1.27 million in May 2019. January 2020 saw the most starts of any month since the beginning of last year, with 1.62 million starts.

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The modest improvement in starts could be attributed to hesitation among contractors to start jobs because of confusion over new rules meant to mitigate the spread of coronavirus, which vary between jurisdictions. The higher costs associated with adopting those measures could also be slowing starts.

May’s lackluster starts could reflect short-term delays. Other data suggests the mid-term and long-term prospects for the housing market are better than what May’s number reflect.

The National Association of Builders’ poll saw builder sentiment record its highest jump ever, according to the Journal.

Mortgage applications hit an 11-year monthly high last week, while refinancing surged 10 percent month-over-month thanks to low interest rates. [WSJ] — Dennis Lynch

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ConstructionCoronavirusHousing Market