Builders broke ground on more new homes in May. Home construction rose 3.5 percent from April to a seasonally adjusted annual rate of 560,000 units per year, the Commerce Department says.
Housing permits, a gauge of future construction, rose in May to the highest level since December.
Permits for buildings with five or more housing units jumped to its highest point since October 2008 — well before a second wave of foreclosures knocked home prices down further.
The number of single-family homes started in May rose a modest 3.7 percent.
Economists say the pace of construction is far below the 1.2 million homes per year that must be built to sustain a healthy housing market. Many credit-strapped builders are struggling to compete with low-priced foreclosures.
Though new homes represent a small fraction of the overall housing market, they have an outsize impact on the economy. Each home built generates, on average, three jobs and $90,000 in taxes, according to the NAHB.
And single-family home purchases ultimately contribute more to the broader economy than apartment sales do. That’s because buyers of single-family homes tend to spend more on furnishings, appliances, landscaping and other home improvements. They are also more likely to move up to bigger and more expensive homes later.
Flooding and tornadoes across large portions of the Midwest and South delayed construction this spring, economists said. But even so, any rebound in the coming months will be modest, said Paul Dales, senior U.S. economist at Capital Economics.
Home building was uneven across the country: It fell 3.3 and 4.1 percent last month in the Northeast and Midwest, respectively, but rose 1.5 percent and 18.1 percent in the South and West. The big gains in the West were largely due to increased apartment construction.
Few people think it makes sense to put their home on the market in this environment. Roughly 92 percent of homeowners say it’s a bad time to sell, according to the latest Thomson Reuters/University of Michigan index of consumer sentiment.Share