NAHB: Builders show mixed signals, still cautious about adding inventory

Citing data from the U.S. Department of Housing and Urban Development, the National Association of Home Builders (NAHB) reported that housing starts dropped more than 6 percent in May, to a seasonally adjusted annual rate of about 1 million units.

Only the South recorded an increase in housing starts during May, while every other region showed a decline. The largest drop occurred in the Northeast, where housing starts fell by more than 25 percent.

Despite the decline in monthly figures, starts are still up more than 9 percent compared to one year earlier. Additionally, NAHB Chief Economist David Crowe called an increase in the number of single-family permits "evidence that builders expect continued release of pent-up demand and a gradual expansion of the housing market." Crowe said the NAHB expects to see a year over year increase of 12 percent in total housing starts during 2014.

The report also underscored the extent of stakeholders' uncertainty about how long the current conditions in the housing sector will prevail, and how things will change going forward. NAHB Chairman Kevin Kelly pointed out that there are reasons for builders to "move carefully in adding inventory. They are also facing supply chain issues, such as access to lots and labor."

Access to labor and materials can not only affect the rate of new residential construction, but also the cost of replacing existing structures. On the other hand, with fewer new residential construction projects to handle, builders may have extra capacity to take on repair or replacement jobs. One of the benefits of using the leading provider of web-based property valuation solutions, includes our sorting through residential cost increases and decreases, through builder supply and demand, and providing fast, accurate property valuations.