US: Housing Starts reach new cycle high but Building Permits fell - Wells Fargo

Today’s data in the US showed that Housing Starts rose 5% in May (above the 1.4% increase of market consensus) while Building Permits fell 4.6% (vs -1.4). Analysts at Wells Fargo, point out that May’s increase was led by a surge in homebuilding in the Midwest.

Key Quotes:

“Housing starts rose more than expected in May, climbing 5 percent to a 1.35 million-unit pace. Both single-family starts (+3.9 percent) and multifamily starts (+7.5 percent) rose in May. Permits fell, however, dropping 4.6 percent to a 1.30 million-unit pace from an upwardly revised 1.36 million-unit pace in April.”

“Given that so much of May’s increase was in the Midwest, there may be a temptation to downplay the improvement in the headline number.”

“Rising prices for lumber and other building materials are also causing many smaller homebuilders to delay projects until later this year, when lumber prices should ease somewhat.”

“Starts had surged earlier this year, however, and saw less of a pick up this spring than they typically do, resulting in a seasonally-adjusted decline. On a year-to-date basis, housing starts are running 22.4 percent ahead of their year-ago pace.”