US Housing Starts Recover Sharply From Record Low
May releases of US housing starts and building permits rose as expected but at a significantly higher rate than the Bloomberg consensus estimate. Permits rose four percent on an annualized basis to 518K from 498K versus expectations for a gain to 508,000. Meanwhile, housing starts increased 17.2% to 532K from 454K compared to a forecast for a rise of just 6.8% to 485,000. Starts of single family homes increased for the third month at 7.5% while multi-family homes posted a sharp rise of 61.7% following a considerable 49.4% loss in April. Despite the improvements, construction remains constricted with contraction worsening to 33.8% from the previous year and a monthly fall of 4.5%. Overall, concern remains high as rising mortgage rates have caused a sharp drop in refinancing on loans. Further increases, along with rising unemployment, could lead to higher foreclosure rates in the months ahead and a new wave of housing distress. US market index futures were higher prior to the release while the dollar has depreciated against several majors leading up to the open of US equities.