Housing Construction Increase…Again

WASHINGTON D.C. — The Commerce Department reported Thursday that housing starts rose 0.2 percent last month. The increase in housing construction is primarily due to low mortgage rates.

The Commerce Department report notes that construction of new homes and apartments edged up to a seasonally adjusted annual of 2.009 million units, up from 2.005 million units in April, a month when construction activity had jumped by 9.4 percent.

“Builders are operating at capacity,” said Dave Wilson, president of the National Association of Home Builders. “With mortgage rates and other market conditions still very favorable, they see no letup through the summer months ahead.”

The 0.2 percent increase in construction reflected a 4.7 percent increase in construction of single-family homes, which rose to a rate of 1.704 million units last month. Construction of apartments, however, fell by 19.1 percent to an annual rate of 266,000 units.

Privately-owned housing completions in May were at a seasonally-adjusted annual rate of 2/071 million. This is 6.9 percent above the revised April estimate and 8.5 percent above the May 2004 rate of 1.909 million. Single-family housing completions in May were at a rate of 1.699 million, 4.9 percent above the April figure of 1.619 million. May’s rate for units in buildings with five units or more was 318,000.

“The overall housing market continues to exhibit ongoing strength,” said NAHB Chief Economist David Seiders. “Major forces driving the housing marketÅvery favorable mortgage rates as well as strong household income and job growth—continue to bolster housing demand.”

By region of the country, construction was up 18.7 percent in the Midwest to an annual rate of 185,000 units followed by a 12.3 percent gain in the West, where homes and apartments were started at an annual rate of 540 units. Construction activity was also up in the Northeast, which recorded a 5.1 percent increase to an annual rate of 185,000 units.

The only region of the country that suffered a decline in activity last month was the South, where housing starts fell 12.1 percent to an annual rate of 903,000 units.