The monthly building permits and housing starts data will be coming out today amid a quiet US trading session. The data which covers the month of May is forecast to show no major changes from the previous month.
Economists polled expect the building permits to be at 1.30 million. This marks a somewhat unchanged print from a revised 1.29 million building permits issued the month before. On a year over year basis, building permits grew just 1.0% in April.
The data underlined the suggestion that a speed up in construction was unlikely to happen.
The housing starts data is forecast to show an increase of 1.24 million. This is, again, the same pace of increase as seen in April.
But with the home builder confidence rising slightly in May, today’s data could see a modest beat on the estimates. Data from the home building activity contributes to the overall GDP. Some view this as a sign of economic strength.
While the US economy has been fairly better, the recent trends in the labor market, however, seem somewhat alarming. The housing market data comes ahead of the Fed’s meeting this week on Wednesday.
The prospects of a Fed rate cut later down the line this year could, however, help the sentiment in the housing sector for a while.
Building Permits Rise 1.29 Million in April
April’s building permits and housing starts data did not show any major shifts in the housing sector. Most of the modest gains came from multi-family units which drove the bulk of the data. This was followed by increases in single-family units.
This coincides with the rebound in new home sales in the previous month. The new home sales report, according to data from the Commerce Department grew to a revised 723k. But new home sales grew at a slower pace in April to 673k on a seasonally adjusted basis.
The data for April, although subdued, was in line with estimates. Overall, building permits and housing starts reports are on a firmer footing following the slump in the previous months.
The housing sector data also got a boost with US mortgage rates falling sharply since the fall of last year. This makes home buying, both new and existing, somewhat more attractive.
The Fed had initially pledged to keep rates unchanged for the remainder of the year. The announcement was made at the March FOMC meeting. Since then, the housing markets have been attempting to recover off the lows.
US Home Builder Confidence Rises in May
Data from the National Association of Home Builders or NAHB saw home builder sentiment improving in May. The NAHB confidence ticked higher to 66 in May, rising by three points from the month before.
The reading on the home building sentiment index was the highest since October of last year. A reading above the 50-level suggests expansion. The data was a welcome change as home building confidence was weak for most of 2018.
The sub-index gauge of the NAHB report which tracks sales conditions grew by three points, rising to 72. The improvement in the home builder’s confidence could potentially suggest that both housing starts and building permits could rise in May.
While mortgage rates have been in favor, driving activity, the cost of raw materials dents the sentiment. With the US engaged in a trade war with China, the cost of importing raw materials has increased.
However, it is yet to be known whether the increase in raw materials will offset whatever gains are coming from the lower mortgage rates.
Will Building Permits Rise in May?
There is scope for building permits to rise in May, perhaps even beating estimates. Given the higher homebuilder confidence in May and the warmer weather, the number of units could rise.
But on the downside, the risks of the tariffs on imports could have an impact to a certain extent. Overall, it’s quite likely that building permits could beat the estimates of 1.30 million.