American home builders are planning more housing than at any time in more than seven years with the bulk of the new construction in rental units and in the Northeast, even as construction started on fewer homes last month after an April surge.
Building permits soared 11.8 percent in May to a 1.275 million annualized rate, well ahead of the 1.1 million forecast, after April’s 1.14 million units for the best two month total since declining days of the housing bubble in late 2007.
Housing starts declined 11.1 percent to 1.036 million, which followed April’s 1.17 million revision. The April and May total of 2.15 million was also the highest since the last two months of 2007.
Permits were heavily skewed to rental units as requests for single family dwelling rose just 3 percent to 683,000s but permissions for multiple units soared 25 percent to 592,000.
Within the rental category it was the largest buildings that were most popular. Permits for structures with 2-4 units rose 10 percent to 35,000 but permits for building with 5 or more units jumped 26 percent, to 557,000 annualized, the highest total since a one month spike to 674,000 in January 1990.
The geographic distribution was also striking. Permits rose in the Northeast 78 percent to an annualized rate on 311,000 in May. That is the second highest yearly pace in the 55 year history of the series, topped only by 317,000 in March 1987. In the Midwest permits gained 16 percent, they fell 4 percent in the South and 2 percent in the West.
Some of the disparity in local distribution is probably due to the harsh winter in much of the Midwest and East that could have delayed construction planning. It should be noted that the prior winter was equally difficult and there was no spike in building permits in the spring of 2014.
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