US housing starts fall 4.8% in May, but one-family homes gain

19 June 2012 15:06  [Source: ICIS news]

WASHINGTON (ICIS)--US new home construction fell by 4.8% in May from April, the Commerce Department said on Tuesday, but the overall decline was due to a sharp fall-off in apartment construction, while the core market for single-family housing starts rose by 3.2%.

In its monthly report, the department said that housing starts last month were at a seasonally adjusted annual rate of 708,000, down from the upwardly revised April figure of 744,000 units. April housing starts originally had been estimated at 717,000.

While the May figure was down by nearly 5% from April, it was still much better than a year ago – up by 28.5% from May 2011.

Despite the month’s decline in overall new residential construction, the department’s figures show that the crucial single-family home market saw improvement. In that one-family sector, housing starts were at 516,000, compared with the April figure of 500,000.

But construction activity in multi-family apartment buildings – which makes up about 25% of the new housing market – fell off sharply last month, down by 24.2% from April.

However, some economists might see a silver lining in the apartment downturn. 

In years since the US housing market collapse, construction of multi-family housing complexes has been driven in part by the wave of bank foreclosures on those that had fallen behind on their mortgage payments.  The flood of former home owners has fuelled a mini-boom in apartment construction, even while the market for single-family homes crumbled.

But the downturn in apartment construction might be short-lived, as bank foreclosures have recently begun to rise anew.

The housing market is a key downstream consumer sector for the chemicals industry, driving demand for a wide variety of chemicals, resins and derivative products such as plastic pipe, insulation, paints and coatings, adhesives, roofing materials and synthetic fibres, among many others.

The American Chemistry Council (ACC) estimates that each new home built represents some $15,000 (€11,850) worth of chemicals and derivatives used in the structure or in production of component materials.

New home construction is poised to improve further, according to the department’s data.

The report said that the number of building permits issued in May was at a seasonally adjusted annual rate of 780,000 – an increase of 7.9% from the April figure of 723,000.

In addition, building permits for single-family homes rose by 4% in May from April, and multi-family construction permits increased by 17.7%.

Building permits are issued by local governments when contractors are ready to break ground and begin construction of a residential structure, so monthly permitting data are seen as a real-time indicator of the housing sector’s near-term prospects.

The May increase in housing starts for single-family homes reflects a recent gain in market confidence among home builders.

US Housing Starts


May ’12

Apr ’12

Apr-May ’12

May ’11

May ’11 to May ’12

US Housing Starts

708,000*

744,000*

-4.8%

551,000*

28.5%

* Seasonally adjusted & annualised

($1 = €0.79)

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy


By: Joe Kamalick
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