Home building seems to have regained some of its footing after a disastrous setback in April. The National Association of Home Builders (NAHB) said optimism has improved substantially among its new home builder members. The Housing Market Index that measures their confidence in the market has regained 28 of the 42 points it dropped in April. Twenty-one of those points were added this month.
That optimism seems to have led to action. According to the Census Bureau’s Residential Construction report for May, building permits were issued at an annual rate of 1.220 million units, a 14.4% increase from April. Single-family permits rose 11.9%.
NAHB economist Robert Dietz called the permit data “the turning point for the market.” An increase in the pace, he said, signals gains for single-family starts ahead.
The data for housing starts was not quite as encouraging and completions were down considerably. Both numbers could reflect the pandemic’s interruption of a lot of the construction underway in the early spring. Builders likely spent May concentrating on finishing those projects rather than starting new ones. Nonetheless, starts increased by 4.3% compared to April.
Construction still has a long way back to normal. Permits were 8.8% lower than during the previous May and starts were down 23.2%. Both are understandable after the two measures cratered by 20.8% and 30.2%, respectively, in April.
The early recovery was more pronounced in the West than other regions with starts surging 69.8% and permitting up by 12.3%.
Green Shoots
Construction wasn’t the only hopeful news this week. There were quite a few green shoots peeking out of the corona virus rubble.
Applications for purchase mortgages continue to gain ground, rising for the ninth straight week as interest rates (as reported by the Mortgage Bankers Association) hit another all-time low. The volume of these applications is now the highest in 11 years.
Freddie Mac said the nation’s savings rate increase from 12.7% in March to a record setting 33%. This was, in part, the result of stimulus checks which boosted personal income and provided an economic cushion even as wages and salaries were falling. It also resulted from a shut-in population that had few places to spend their money.
Apparently, however, they are spending it now. Retail sales which absolutely collapsed in March and April (and wasn’t all that healthy before the virus visited) grew 17.7% in May, the largest monthly gain on record.
Interest rates are still historically low, so if you’re considering buying, selling, or refinancing, shoot us an email or call.