Total Housing Starts Rise in May

The seasonally adjusted annualized rate of building permits issued nationwide for new housing construction rose to its highest level of the past three months during May. The annualized rate of 1.674 million units permitted was 2.6% above the revised April total. The May 2002 permit total was also 0.7% higher than for the same month of 2001.

The permit pace rose slightly in April in three of the four broad regions of the country; permit volume declined by 0.9% in the Midwest. From April to May, single-family home permit volume was up 0.7%, while the pace of multifamily work permitted soared by 9.1%. Through the first five months of this year, total permit volume nationwide was running 1.7% ahead of the January-May 2001 total. Single-family permit volume was 4.3% greater through the first five months of 2002 than during the same period of last year, while the number of units newly permitted in multifamily buildings was running about 7% behind the 2001 pace.

The April-to-May improvement in starts was even more impressive than that realized in permit volume levels. The annualized pace of total housing starts surged by 11.6% during May after steep declines in March and April. Total starts in May 2002 were at a seasonally adjusted annualized pace of 1.733 million units, 8.0% better than during the same month of 2001.

New single-family homes were started at a rate 9.6% higher in May than in April. And new multifamily construction starts soared 20.3% in May after a decline of almost the same magnitude in April. Total May 2002 single-family starts (after seasonal adjustment) were 8.4% stronger than in May 2001, and the multifamily sector recorded an over-the-year gain of 6.5%.

During the first five months of this year, overall housing starts totaled an estimated 681,600 units. This was 4.4% greater than during January-May 2001. Although the multifamily sector failed to grow (declining by 0.3% from the first five months of last year to January-May 2002), starts of single-family homes increased by 5.6%.

The starts pace rose in three of the four regions of the country from April to May, with the Midwest being the exception. But compared with starts in May 2001, the level of starts this May was slightly lower in two regions, the Midwest (-0.3%) and the West (-2.2%). Through the first five months of 2002, total starts were up compared with the year-ago pace in the South (+8.8%), Northeast (+4.4%) and Midwest (+0.7%), but slightly lower in the West (-0.9%).

Thirty-year fixed-rate mortgages carried an average interest rate of 6.81% this May, down from the 7.15% average of May 2001. Adjustable-rate mortgages tied to the yield on one-year Treasury bills averaged an interest rate of 4.79% during May of this year, well below the 5.88% average of May 2001.

Single-family home sales remained healthy through the first five months of this year. The year started strongly, and then sales eased moderately during February and March. But April and May numbers were strong again. May 2002 sales of single-family homes nationwide were 7.9% above the total for May of last year. And through the first five months of 2002, single-family home sales were running about 6% above the total for January-May 2001.

New single-family home sales (at a seasonally adjusted annualized rate) in May were estimated to be 8.1% stronger than April sales. And the May 2002 annualized sales pace was more than 16% better than the May 2001 pace. Also, the Commerce Department has revised upward all sales figures for February, March and April of this year. Year-to-date sales of new homes were estimated to be running 2.0% ahead of the total for the first five months of 2001. The average sales price of a new home sold this May was 6.1% greater than the average new home price in May 2001, so there's still no sign that a presumptive market "bubble" is about to "burst."

Existing single-family homes sold at an annualized rate of 5.75 million units during May of this year, according to data compiled by the National Association of Realtors. This pace was just 0.3% lower than the April pace and 6.5% above the May 2001 level. Moderate over-the-month sales growth in the West and Midwest was nearly enough to offset losses in the South and Northeast. The median price of an existing home sold during May 2002 was $154,600, while the average price of a resale was $200,100. These prices represented gains of 6.6% and 9.0%, respectively, over the values recorded during May 2001. Over-the-year price appreciation was strongest in the West, but even in the lagging Midwest, existing home resale values rose by more than 5% during the past 12 months.