U.S. Building Permits Decline by 2.8% in May 2024, Hitting Lowest Level Since June 2020

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U.S. Building Permits Drop to Lowest Since June 2020 Despite Revised Estimates

Team FS

26/Jun/2024

Key Points:

Overall Decline: Building permits in the U.S. dropped by 2.8% in May 2024, reaching 1.399 million.
Multi-Unit Permits: Approvals for buildings with five or more units fell by 5.2%, the lowest since May 2017.
Regional Variations: Significant declines were observed in the Northeast and South, while the Midwest and West saw increases.

U.S. Building Permits Hit Lowest Level Since June 2020

In May 2024, building permits in the United States fell by 2.8% to a seasonally adjusted annual rate of 1.399 million. This revised figure is higher than the preliminary estimate of 1.386 million, yet it remains the lowest rate recorded since June 2020. The decline in building permits highlights ongoing challenges in the housing and construction sectors.

Detailed Breakdown of Building Permits

Multi-Unit Buildings:
Approvals for units in buildings with five units or more plummeted by 5.2%, reaching a rate of 386,000. This figure represents the lowest level since May 2017, slightly improved from the initial report of a 6.1% decline to 382,000.

Single-Family Homes:
Authorizations for single-family homes decreased by 2.1%, resulting in a ten-month low of 956,000. The preliminary estimate had suggested a larger decline of 2.9% to 949,000. This reduction reflects a slowdown in the single-family housing market, influenced by various economic factors including rising interest rates and construction costs.

Regional Insights

Northeast:
The Northeast experienced a significant drop in building permits, falling by 21.1% to 120,000. This revised figure is slightly better than the earlier report of a 22.4% decrease to 118,000. The steep decline in this region may be attributed to stricter zoning regulations and higher construction costs.

South:
In the South, building permits fell by 5.9% to 779,000, compared to the preliminary estimate of a 6.6% drop to 773,000. This region, typically a hub for housing development, has faced disruptions due to economic uncertainties and supply chain issues.

Midwest:
Contrary to the overall national trend, the Midwest reported an 8.4% increase in building permits, maintaining a steady rate of 180,000 as per the preliminary release. This growth indicates a resilient housing market in the region, possibly due to lower land costs and increasing demand for housing.

West:
The West also saw an 8.8% rise in building permits, reaching 320,000, an upward revision from the initial 7.1% increase to 315,000. The region's growth may be driven by ongoing urbanization and investment in housing infrastructure.

Implications for the Housing Market

The overall decline in building permits suggests a cautious approach by developers amid economic uncertainties. The significant drop in multi-unit building approvals points to potential challenges in the rental and affordable housing markets. On the other hand, regional variations highlight areas of resilience and growth, offering a mixed outlook for the national housing market.

Conclusion

The decrease in building permits in May 2024 reflects broader economic trends impacting the U.S. housing market. While some regions face significant declines, others demonstrate growth and stability. Monitoring these trends will be crucial for stakeholders in the construction and real estate sectors as they navigate an evolving economic landscape.

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