U.S. housing starts rebound in May, home building activity likely to continue to improve in coming months

U.S. housing starts rebounded in the month of May, rising 4.3 percent sequentially to 974k units. While this was slightly below the consensus expectations of 1.1 million units, it is the first time in four months that starts rose.

Multi-unit starts drove the rise in May, rising 15 percent sequentially. Meanwhile, single unit starts remained flat at 675k in the month.

Region wise, housing starts recovered strongly in the West and Northeast, whereas the Midwest and South continued to record decline in the month.

Permits bounced back in May after shrinking 21.3 percent in April. Permits rose 14.5 percent month-on-month. Still, the number of permits was 15 percent lower than where it was in February.

“With states restarting their economies, we are seeing a number of economic indicators turn around, housing starts was no exception. However, the level of starts remains well off the peak before the crisis reflecting the cautious approach homebuilders are taking given the unprecedented nature of today's economic environment. With mortgage rates at historical lows, and labor market conditions gradually improving, we expect consumers to continue to dip their toes into the housing market. Indeed, mortgage applications for home purchases has improved steadily since April, this will likely fuel more home building activity in the months ahead”, said TD Economics in a research report.