Outlook for U.S. housing improves as permits rose in May

In this Wednesday, May 16, 2012, photo, a construction worker carries a load of wood to a new home as they frame the house in Chester, Va. U.S. builders started work on more single-family homes in May and requested the most permits to build homes and apartments in three and a half years. The increase suggests the housing market is slowly recovering even as other areas of the economy have weakened. (AP Photo/Steve Helber)
In this Wednesday, May 16, 2012, photo, a construction worker carries a load of wood to a new home as they frame the house in Chester, Va. U.S. builders started work on more single-family homes in May and requested the most permits to build homes and apartments in three and a half years. The increase suggests the housing market is slowly recovering even as other areas of the economy have weakened. (AP Photo/Steve Helber)
By Alan J. Heavens and INQUIRER REAL ESTATE WRITER
Posted: June 21, 2012

Permits for home construction rose 7.9 percent in May to the highest level since September 2008, an encouraging sign for the future of the market and offsetting the monthly decline in housing starts.

The Census Bureau said Tuesday that single-family permits, a key indicator of the future health of the market, were up 4 percent in May from April.

Multifamily permits rose 15.3 percent, an indication of perceived long-term strength in the apartment market as first-time buyers wait for the end of price declines before they shifting from renting to owning.

Economists attribute the decline in housing starts — 4.8 percent overall because of a 21.3 percent drop in multifamily — to payback for weather-related job gains earlier this year.

"The trends in the permits numbers imply that we should continue to see improvements in housing starts over the next few months in both the single- and multifamily categories," said economist Patrick Newport at IHS Global Insight in Lexington, Mass.

In May, builders started work on 708,000 units, which is the annual rate — meaning if the number each month was unchanged, this would be the year's total starts.

This was down from April, but up from the 551,000 units started in May 2011.

"If conditions were normal, the economy would need to put up at least 1.6 million units a year to meet demand coming from housing's three main drivers: household formation, demand for second homes, and replacement demand," Newport said, adding that "we are not expecting housing starts to climb above the 1.6 million mark until 2016."

National Association of Home Builders' chief economist David Crowe said the data provided "evidence of the kind of slow but steady growth that we expect to see in housing production through the end of the year."

This "shows that housing continues to regain strength regardless of some weakening in other parts of the economy," Crowe said.

Contact Alan J. Heavens at 215-854-2472, aheavens@phillynews.com or@alheavens at Twitter.

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