WASHINGTON -- Construction of homes edged down slightly in May, with builders pulling back in the Northeast and Midwest.
Housing starts ticked down 0.3 percent to a seasonally adjusted annual rate of 1.16 million units, the Commerce Department said Friday. The government's residential construction report can be volatile on a monthly basis, which might explain the slight decrease.
Home construction has improved much of this year, with single-family houses accounting for much of the gains, unlike recent years when developers focused more on apartments. Housing starts have climbed 10.2 percent compared with the first five months of 2015, a sign that healthy demand exists because of low mortgage rates and a relatively healthy job market with unemployment at 4.7 percent.
"All along we expected this would be a pretty gradual recovery, and that's largely coming true," said Scott Brown, chief economist at Raymond James Financial Inc. in St. Petersburg, Fla. "We're still very far from a boom period in housing at all here, but I think the fundamentals are still pretty good."
Single-family house starts have climbed 14.5 percent this year, evidence that builders are actively seeking homeowners rather than renters.
Work on multifamily homes, such as apartment buildings, fell 1.2 percent to a 400,000 annual rate. Data on these projects, which have led housing starts in recent years, can also be volatile.
"Single-family [home] builders are slowly, but surely, gaining ground on what has been a strong four years for multifamily construction," said Ralph McLaughlin, chief economist at the online real estate firm Trulia.
Analysts at Bank of America Merrill Lynch expect that single-family home construction will total 800,000 this year. That would mark solid growth, yet remain significantly below the 1960 to 2000 average of 1.04 million in a sign of how sluggish the recovery from the housing bust and recession has been.
Starts rose 14.4 percent in the West and 1.5 percent in the South last month. They plunged 33.3 percent in the Northeast and fell 2.5 percent in the Midwest.
Applications for building permits, an indicator of future activity, rose 0.7 percent in May to an annual rate of 1.14 million.
Builders also became a bit more confident in June.
The National Association of Home Builders/Wells Fargo builder sentiment index released Thursday rose to 60 this month, up from 58 in May. Readings above 50 indicate more builders view sales conditions as good, rather than poor.
Lower borrowing costs have also aided construction and sales of new homes.
Mortgage buyer Freddie Mac, the Federal Home Loan Mortgage Corp., said Thursday that the average 30-year fixed-rate mortgage is 3.54 percent, down from 4.00 percent a year ago.
Information for this article was contributed by Victoria Stilwell of Bloomberg News.
Business on 06/18/2016