Disappointing US home construction starts belie firmer market

[WASHINGTON] US home construction starts rose less than forecast in May, indicating builders were slow to resume work and contrasting more recent data that point to a pickup in housing demand.

Residential starts rose 4.3 per cent to an 974,000 annualised rate from a month earlier, the second-lowest level since 2015, according to a government report released Wednesday. That compared with the median forecast in a Bloomberg survey of 1.1 million and followed an upwardly revised 934,000 in April.

At the same time, applications to build, a proxy for future construction, climbed 14.4 per cent to a 1.22 million rate. An S&P index of homebuilder stocks climbed 1.1 per cent in earlier trade Wednesday.

"We aren't much bothered about the undershoot in starts; the outlook is very positive, given the astonishing surge in mortgage demand," Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note.

Other figures show the housing market is picking up steam. A weekly measure of mortgage applications for home purchases has increased for nine straight weeks and stands at an 11-year high. A report Tuesday showed a gauge of builder sentiment rose by a record 21 points in June.

The government's report Wednesday showed a pickup in the number of residential projects authorized but not yet started, indicating ground breaking may firm up in coming months. The number of single-family homes authorised and awaiting construction rose to an annualised 98,000 in May, the highest since December 2018.

Single-family starts were little changed from April. Multifamily starts, a category that tends to be volatile and includes apartment buildings and condominiums, jumped 15 per cent, the first gain in four months.

BLOOMBERG