Just Listed brings you the latest news and information from the Twin Cities-area commercial and residential real estate market and beyond from veteran reporters Jim Buchta and Kristen Leigh Painter.

Housing starts retreat, but single-family permits post the largest advance in 20 months

Posted by: Jim Buchta under Buying Updated: June 17, 2014 - 10:21 AM

Housing construction slowed a bit during May, but permits to build single-family houses increased, according to the latest report on the health of the construction industry across the country. The U.S. Census said that last month housing starts declined 6.5 percent overall with single-family starts falling 5.9 percent. However, single-family permits increased 3.7 percent, suggesting better times ahead for home builders as demand for new houses increase.

Yesterday, the National Association of Home Builders said that builder confidence is on the rise, teetering on "good." At the same time, the apartment construction boom that's been underway for much of the recovery slowed slightly last month.

Here's some reaction:

Brad Hunter, Metrostudy: "Don't panic about the drop in single-family; looking past the monthly noise, the trend is still upward The aggregate number from Census somewhat obscures the underlying trends by market. Digging deeper, we see that some markets are up strongly, while others are in the dumps.....one encouraging change that should help shore up June and July is that the "conversion rate" of traffic has improved somewhat. Consumers are still skittish, and the effects of last year's sticker shock have not faded completely. The traffic through builders' showrooms is still fairly strong, so as long as the "quality" of traffic continues to improve, sales should rise soon."

Patrick Newport & Stephanie Karo, IHS Global Insight: "While it is tempting to herald these numbers as the beginning of the next phase of the recovery, one good month does not a revival make. Over the past year, home-building has become a delicate balancing act. Poor affordability mandates that builders keep their construction costs low, or else shrink their margins—no easy task. Builders find themselves needing to raise wages in order to attract talented construction workers, and paying top dollar for well-located lots. Lot location is key: according to the National Association of Homebuilders, while the total number of developed lots is rising, few shovel-ready plots are located in areas buyers find desirable."

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