May housing starts were down 4.8% from a revised April number to an annual rate of 708,000, but starts in the larger single-family sector were up 3.2% to an annual rate of 516,000 and except for December 2011 the highest since end of the home buyer credit in early 2010. A 21.3% drop in multifamily apartment construction pulled the total down but that sector has exhibited a saw-toothed pattern in the past. Supporting the theory of a data aberration, building permits for both sectors were up, 4% gain for single-family and 15.3% gain for buildings with two or more units in them. May total permits were at 780,000, the highest level since the financial crisis began in fall 2008.
The continued modest growth in single-family construction and permits follows some less than encouraging US and international macroeconomic data and suggests that housing is finally taking its traditional place as a leader rather than follower in economic recoveries. Low mortgage rates, affordable home prices and some modest employment gains have begun to encourage the fence sitters that now is a good time to buy. The economic recovery is regionally diverse, with many pockets of recovery in smaller markets. Regionally, single-family housing permits were up or even in all regions and total permits were down only in the Northeast. Single-family starts were up in the South and West but down 4.3% and 5.4% in the Northeast and Midwest respectively. However, neither of those drops put the annualized levels below their first quarter averages.