Building Starts & Permits Stay Up As Economy Slows

Housing starts and building permits continued to improve in May, but mounting concerns about the overall economy could overshadow the rebuilding homebuyer?EUR??,,????'???s market.

Despite underwhelming reports for the overall economy leading into the summer, the housing market continues to take slow, cautious steps toward recovery.

Building permits, the leading indicator of upcoming home construction, were up in May at a seasonally adjusted annual rate of 780,000, which is 7.9 percent above the revised April rate of 723,000 and a full 25 percent above the May 2011 estimate of 624,000. The figure marks the highest showing for building permits in one month since September 2008, according to a Commerce Department report released June 19.

Housing starts fell 4.8 percent in May, declining to an adjusted rate of 708,000 from the revised April figure of 744,000. A 21.3 percent drop in multi-family building starts, a market segment subject to large swings, produced the decline. The more stable single-family home starts increased 3.2 percent, keeping the overall figure above 700,000 for every month in 2012, also a first since 2008.

The continuing upward trends have economists predicting that home building will be a net positive for overall economic growth for the first year since 2005. However, the job market remains stagnant, with unemployment too high and the labor force participation rate continuing on the same downward path it started during the recession. Job creation stalled further in April, as openings fell by 325,000 to 3.42 million, the lowest since November, according to the Labor Department. Whether the housing market remains a positive sign in an improving economy or simply an outlier in an overall slump will be the question of the summer.