Robust demand fueled by continuing low mortgage rates and favorable economic conditions kept new-home construction humming along at a high pace in May. According to U.S. Commerce Department figures, housing starts edged up 0.2 percent to a seasonally adjusted annual rate of 2.009 million units for the month. This was 1.8 percent above the pace of the same period in 2004.
Single-family home construction led the way with a 4.7-percent increase to a pace of 1.704 million units for the month, 3.3 percent above May of last year.
"The overall housing market continues to exhibit ongoing strength," said NAHB Chief Economist David Seiders. "Major forces driving the housing market -- very favorable mortgage rates as well as strong household income and job growth -- continue to bolster housing demand. Housing production most likely will make another positive contribution to overall GDP growth for the second quarter as builders strive to meet the demand," Seiders added.
Multifamily housing starts dropped in May on a national basis to a seasonally adjusted rate of 305,000 units. This was 19.3 percent below the multifamily market's strong showing in April. "The multifamily market is showing typical month-to-month volatility, but fundamental conditions in the condo and rental markets remain solid," Mr. Seiders said.
On a year-to-date basis, both housing starts and building permits are running significantly above the pace of 2004.
"It is now highly likely that housing production in 2005 will surpass the robust performance of 2004, even if the interest rate structure moves up as projected," Mr. Seiders said.
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