The numbers: Construction on new houses rose 4.3% in May as a reopening U.S. economy and low mortgage rates drew more buyers and encouraged builders to gradually speed up work.
Housing starts climbed to an annual rate of 974,000 last month from a revised 934,000 in April, the Commerce Department said Wednesday. That’s how many new homes would be built in 2020 if the level of construction was the same throughout the entire year.
Economists polled by MarketWatch has forecast starts to rise to a 1.13 million.
Although the increase was less than expected, a sharp increase in builder permits indicates construction is on track to expand more rapidly soon.
Permits to build new houses jumped 14.4 % to a 1.22 million annual pace.
What happened: Housing starts surged 21.5% in the West and 12.8% in the Northeast, the region hit hardest by the coronavirus.
Yet new construction fell 16% in the South, the region with the fastest-growing real estate market. Construction on new homes also declined 1.5% in the Midwest.
Permits rose in all four regions, however.
Big picture: The housing market didn’t decline as much and bounced back quicker than most other industries. Construction was deemed an essential service during the lockdowns and extremely low mortgage rates were able to attract prospective buyers who felt secure about their jobs.
Although the market hasn’t returned close to precrisis levels, it’s expected to continue to improve during the busy summer season. A strong housing market will help the economy recovery faster: New buyers need to furnish their homes and buy other goods and services once they move in.
Market reaction: The Dow Jones Industrial Average DJIA, +2.04% and S&P 500 SPX, +1.89% were set to open higher in Wednesday trades. Stocks surged Tuesday on reports the Trump White House is working on a new stimulus package to help the economy weather the coronavirus crisis.