Wells Fargo Reports: Housing Starts Disappoint Once Again

Housing starts fell 5.5 percent in May, with both single-family and multifamily starts declining. Permits also fell, suggesting that starts are likely to languish near their current levels for another few months.

Explaining Away Weakness Is Getting Old

• Housing starts once again turned in a disappointing performance, with single-family starts falling 3.9 percent and multifamily starts falling 9.7 percent. Permits also declined both at the single-family and multifamily level, suggesting there is more at play than some temporary statistical issue.
• Even with another weak month, starts are still running 3.2 percent ahead of their year ago pace through May.

A Slow Housing Recovery Remains in Place

• May’s 3.9 percent drop in single-family starts and 1.9 percent drop in single-family permits is perplexing, particularly given that builders are selling homes as fast as they can deliver them.
• Worker shortages may be a growing issue, with the number of single-family homes authorized but not started rising 4.0 percent in May and surging 14.7 percent over the past year. Apartment construction is clearly declining, however.