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Homebuilding Set To Keep Softening As Pullback In Permits Continues

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May's New Residential Construction report came in weaker than expected, with Housing Starts missing survey expectations by nearly 100k at 1,277k (1,370k expected, 1,352k prior rev), a fall of 5.5% M/M /19.3% Y/Y. Permits likewise disappointed, at 1,386k (1,450k expected, 1,440k prior rev), down 3.8% M/M and 9.5% Y/Y. Completions were down 8.4%M/M but up 1.0% Y/Y.

  • The ongoing theme of nascent homebuilding weakness is evident in the report, most notably the pullback in multifamily residential construction activity, which represents around one-third of overall activity.
  • Multi-unit permits fell to the lowest since April 2020, and at 437k have fallen substantially since the 813k peak of February 2023. Starts have actually bounced slightly from near-decade lows in March, but at 329k in both April and May, remain below pre-pandemic levels.
  • Single family activity, which has help keep overall homebuilding buoyant over the past year, has sagged after an impressive bounce between 1Q 2023 and 1Q 2024: permits/starts fell in May to 949k/982k from 977l/1036k prior, well off the recent highs above 1M.
  • Units under construction remain robust (1593k) but have almost certainly peaked, with permits and starts suggesting weaker activity in the quarters ahead.

Source: Census Bureau, MNI

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May's New Residential Construction report came in weaker than expected, with Housing Starts missing survey expectations by nearly 100k at 1,277k (1,370k expected, 1,352k prior rev), a fall of 5.5% M/M /19.3% Y/Y. Permits likewise disappointed, at 1,386k (1,450k expected, 1,440k prior rev), down 3.8% M/M and 9.5% Y/Y. Completions were down 8.4%M/M but up 1.0% Y/Y.

  • The ongoing theme of nascent homebuilding weakness is evident in the report, most notably the pullback in multifamily residential construction activity, which represents around one-third of overall activity.
  • Multi-unit permits fell to the lowest since April 2020, and at 437k have fallen substantially since the 813k peak of February 2023. Starts have actually bounced slightly from near-decade lows in March, but at 329k in both April and May, remain below pre-pandemic levels.
  • Single family activity, which has help keep overall homebuilding buoyant over the past year, has sagged after an impressive bounce between 1Q 2023 and 1Q 2024: permits/starts fell in May to 949k/982k from 977l/1036k prior, well off the recent highs above 1M.
  • Units under construction remain robust (1593k) but have almost certainly peaked, with permits and starts suggesting weaker activity in the quarters ahead.

Source: Census Bureau, MNI