Housing Starts: Surprise Jump

Bottom Line:  Housing starts rose sharply in May, jumping 21.7% from the April revised reading. While there were negative revisions to April data, the overall upside surprise was significant. Single-family activity jumped to its highest level in 11 months as multi-family starts hit a record high on continued demand for new 5+ unit complexes. New permits, a more forward-looking indicator, rose to a six-month high. While less strong than the headline start number, permits were remarkably robust in the single-family sector.Overall, the signs of bottoming in housing developing over months may have turned into a full rebound. One month of data is never enough to make a decisive call on the trend, especially with this volatile series. But this has all the hallmarks of a housing market that has found a new equilibrium amid lower affordability but continued underlying solid demand. We are even more confident in our forecast for steady or slightly positive residential investment in the 2nd Quarter and a return to positive growth in the 2nd Half.

Total US Annualized Housing Starts ROSE 291k to 1.63M, ABOVE the 3-Month average of 1.45M, ABOVE the 6-Month average of 1.41M and 88k ABOVE the year-ago level.