Beginning construction of new U.S. homes increased in May and permits to build single-family houses rose to a five-year high, extending a rebound that is helping shore up the expansion.
Housing starts climbed 6.8%, less than forecast, to a 914,000 annualized rate after a revised 856,000 pace in April, the Commerce Department reported today in Washington. The median estimate of 82 economists surveyed by Bloomberg called for a 950,000 rate. Applications to build one-family homes increased 1.3% to a 622,000 pace, the fastest since May 2008.
Building permits that exceed the level of starts indicate residential construction will keep rising as improving job opportunities and historically low mortgage rates lure buyers. The recovery in residential real estate that’s spurred optimism among builders such as Hovnanian Enterprises Inc. shows how record monetary stimulus from Federal Reserve policy makers, who meet today and tomorrow, is bolstering economic growth.
“We’ll continue to see starts increase through the remainder of this year and into the next,” said Ryan Sweet, an economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, who projected 905,000 starts at an annual rate. “Permits are still slowly heading in the right direction.”
Economists’ estimates for starts in a Bloomberg survey ranged from an 875,000 pace to a 1.02 million rate after an initially reported 853,000 in April.
Stock-index futures held gains after the figures, with the contract on the Standard & Poor’s 500 Index expiring in September rising 0.2% to 1,636.1 at 8:49 a.m. in New York.
Another report showed the cost of living in the U.S. rose less than forecast last month. The consumer-price index climbed 0.1% after falling 0.4% in April, the Labor Department said. The median forecast of economists called for a 0.2% gain.
Total building permits decreased 3.1% to a 974,000 million annualized rate in May, reflecting a 10% slump in applications for multifamily dwellings. Economists projected a 975,000 pace, according to the Bloomberg survey median.
Construction of single-family houses rose 0.3% to a 599,000 rate from 597,000 the prior month.