May Housing Starts: Mixed Signals

• May housing starts fell 0.9% from April and 4.7% from May 2018, to 1.27 million units (SAAR). April's initially reported numbers were revised. Starts were 4.7% below May 2018, according to the Census Bureau.
• Building permits rose 0.3% in May from April, to 1.29 million. It's 0.5% below May 2018.
• Housing completions in May fell 9.5% from April, and 2.8% below a year ago.

A slew of mixed market signals is both buoying and biting builder confidence as the year progresses, resulting in a small monthly slide in new housing starts in May after a slight upward revision to April numbers. For buyers who can secure an adequate down payment and find a home in their price range, low mortgage rates mean a monthly payment remains quite affordable – and mortgage applications are up accordingly. While buyer demand should continue to be strong, builders are having a tougher time replicating their buyers’ affordability advantages. Lumber prices have fallen somewhat, but labor costs are rising quickly – itself a sign of strength in the economy, as those who may traditionally have found work in construction are able to find good-paying jobs in other industries. Buildable land is at a premium, making it hard for builders to find areas where they can turn an acceptable profit in the still-strong housing market. We’re left with a new construction market taking two steps forward and one step back, and May was a one-step-back month.