US Home Constructions Increase by Only 3.6% in May

U.S. home construction rose 3.6% in May as builders battled a surge in lumber prices that have made homes more expensive. The May increase left construction at a seasonally adjusted annual rate of 1.57 million units, the Commerce Department reported Wednesday. Applications for building permits, looked to for indications of activity ahead, fell 3% in May to a seasonally adjusted annual rate of 1.68 million units.  Housing has been one of the standout performers during the pandemic-triggered recession. But many economists believe that the surge in home building and sales over the past year may begin to slow, especially for single-family homes. Builders are getting one break. Lumber prices, which surged to record levels this year, have started to come down, suggesting that a speculative bubble that had developed in lumber prices is beginning to deflate. Rising material prices and supply chain shortages were blamed for a drop in builder confidence this month The National Association of Home Builders/Wells Fargo survey reported this week that builder confidence had declined two points to 81 in June, still a high level. Building activity has been on a rollercoaster this year. The 3.6% overall gain in construction starts in May followed a 12.1% plunge in April, which followed a 19.2% surge in March that pushed housing starts to an annual rate of 1.73 million units, the fastest pace since the housing boom of the mid-2000s. For May, the 3.6% increase reflected a 4.2% increase in single-family home construction to a rate of 1.1 million units and a 4% rise in construction of apartments, which climbed to a rate of 465,000 units. By region, housing construction fell a sharp 22.4% in the Northeast but rose in every other region. The gains were led by a 29.9% increase in the Midwest. Construction rose 3.8% in the South and 1% in the West.