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Business Title: New Home Construction Up In May And Permits Are Highest Since 2008 A sign that the economy is improving is that new home starts increased 3.2% in May and applications for permits for new homes and apartments increased 7.9% and are at the highest level in since September 2008. The Census Bureau released the May data this morning. The government also said April was much better for housing starts than first thought. The government revised the April starts to 744,000 — up from an initially reported 717,000 and the fastest building pace since October 2008. Although single family housing starts were up 4.8% in May and 28.8% over last year, total starts were down because new apartment starts dropped in May. Month to month variations in apartments starts are normal because it takes longer to get an apartment project out of the ground than a single family home. What is important is the trend, and the trend has been up for three months. Advertisement Permits for ne construction increased to a seasonally adjusted rate of 780,000 — the most since September 2008. This shows that builders and developers are optimistic about the future. Although 780,000 is half what economists would like to see, it is far larger than the months during the recession when the home building virtually stopped. One of the reasons there has been high unemployment is that construction workers have been sitting at home due to no work. The fact that homebuilding is beginning to come back will help get some back to work. If Congress would pass a highway funding bill, and perhaps a badly needed infrastructure construction bill, the construction industry could put 1.9 million back to work. Don’t put any money on Congress doing either. Republicans want to keep unemployment high to defeat Obama. One thing helping new home construction is increased demand from homebuyers. This is due in part to a 3 year pent up demand, in part because more people are finding work—4 million new jobs in the last 28 months, and lower interest rates. “We continue to expect housing activity to increase gradually in coming months and residential investment to make a positive ... contribution to GDP growth,” said Peter Newland of Barclays. What would help the housing industry even more is if Congress would pass the President’s proposal to allow home owners with conventional loans re-finance their mortgages even if they owe more than the value of their homes as long as they are making payments. The President has done that for homeowners with government insured mortgages but does not have authority to apply that to non-insured conventional loans. If homeowners can refinance high interest loans at today’s lower interest rates, it would stabilize the housing market and lead to higher values which would give homeowners some of the wealth they lost during the Bush recession in home equity. Again, don’t expect Republicans to act on this either. News on the economy is up and down during this recovery. There will be several headlines of good news, then a report of something like last month’s jobs report. When you take all this on balance, there is a clear trend line upward—not as good as everyone wants to see, but upward nevertheless. Most of us are rooting for more good news. Some, of course, are rooting for failure.
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