Overall housing data released so far this week are mixed. First, the Census Bureau and the U.S. Department of Housing and Urban Development reported lower housing starts in May, down from a revised 744,000 in April to 708,000 in May. Declines were seen in each region except for the West. New construction of multi-family units led the decline, falling from 214,000 to 192,000 for the month. Single-family construction increased from 500,000 to 516,000.
On the positive side, housing permits were up significantly. They rose from 723,000 to 780,000, reaching its highest level since September 2008. Single-family and multi-family units were both higher. This is obviously a good sign, as it could suggest greater activity in the months ahead.
Overall, the longer-term trend remains positive even with the decline in housing starts in May. Illustrating this upward movement, new residential construction has increased gradually over the past few months, where it stood at 630,000 as recently as October.
Other data tend to back this more optimistic interpretation. For instance, the National Association of Home Builders and Wells Fargo announced that its Housing Market Index rose from 28 in April to 29 in May. This was the second consecutive monthly gain. Gains in the Midwest and West were somewhat mitigated by declining activity in the Northeast and South.
This shows a housing market that is continuing to edge marginally higher, with gradual improvements in a still-depressed environment. Measurements under 50 indicate more weakness than strength, putting it into perspective. Yet, the index in May was at a level not seen since 2007, an indicator of slow-but-sure progress.
Chad Moutray is chief economist, National Association of Manufacturers.