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Construction of new homes jumped 17% in May to an annual rate of 532,000, according to the Commerce Department. That was up from the record low of 454,000 homes in April. Applications for new home permits also rose 4% to an annual rate of 518,000 units. The good news helped lift the stock market today.
Still all this is a far cry from when the homebuilding industry was happy and healthy. In 2005 and 2006, the industry sold over one million new homes a year.
Builders remain cautious. The National Association of Home Builders said just yesterday that its index of home builder sentiment fell one point in June. “The outlook for home sales has improved somewhat in recent months, due largely to implementation of the first-time home buyer tax credit and gains in housing affordability,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. “Looking forward, home builders are facing a few headwinds, including expiration of the tax credit at the end of November; a recent upturn in interest rates; and especially the continuing lack of credit for housing production loans.”
Construction starts were strongest in the West and South, weakest in the Northeast.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.