Homebuilders also reduced May single family completions to 491,000 and units under construction to 318,000.  Completions are still above current demand and adding slightly to the surplus of homes for sale.  But the number of homes under construction matches the current pace of sales for the first time in more than three years.  This suggests that homebuilder layoffs will quickly ebb back to near zero and that the long decline monthly single family construction spending slowed late in the spring and may end early in the summer.

However, the multi family market is beset with still worsening economic conditions. Apartment investors face intensifying competition from vacant condos and single family homes as well as continuing declines in the number of potential renters as households double up in a depressed and worsening job market. The condo market has stabilized in most of the country along with the single family market but remains severely depressed in the major condo market in Florida, Nevada and Arizona where the oversupply is the most serious.

Aprils’ 81,000 Multi family starts may turn out to be the low point in this cycle but Mays’s 131,000 multi family starts is probably the average for multi family starts well into next year.

The pickup in housing starts got a big boost from the $8,000 federal tax credit for first time buyers.  The recent move to allow buyers to borrow the $8,000 – for a downpayment – if they get an FHA mortgage came too late to have much impact on May starts but will provide an additional boost during the summer. the initial burst of added single family starts will quickly turn to steady but slow improvement over the next few years.

Housing is emerging from the recession before the rest of the economy so housing demand growth will develop very slowly.  Homebuilders do not have the resources or credit access to build ahead of demand.  And the financially marginal buyers that usually drive the surge of home buying early in a recovery period do not have the credit access to do this in this recovery. Mortgage rates are already being pushed higher by the massive federal borrowing instead of the usual lingering at low levels into the early months of a recovery. Also, the pace of foreclosures is likely to pick up in the next year as more households run out of the of the resources to keep their homes.

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11/06 - Contractors cut 62,000 more jobs in October, mostly for nonresidential building work

11/03 - Federal highway funding still “temporary”

11/02 - Housing gets another boost from Washington

10/30 - Initial jump in GDP growth will ebb

10/29 - Two cities illustrate divergence in regional economic growth

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