There were two major housing reports released this week; Robert already covered one of them, on existing Home Sales from the NAR. Today, we're going to cover New Residential Construction during May from the Census Bureau, which estimates the numbers of new building permits, new home starts and home completions during the month.  As we've mentioned before, this report is usually watched and widely covered for details on new housing starts, but the data has such a large margin of error due to the small sample it's taken from as to render the monthly reports useless for any serious analysis. To collect data for this estimate, census selects a sample of building permits from a random sample of approximately 900 permit offices nationally, to be tracked monthly and in person by field representatives, and further has field representatives conduct a road canvass in a sample of roughly 70 land areas not covered by building permits, to identify the start of new residential buildings. As inexact as that is, we'll again cover what census reported & untangle it anyway, so no one can be snookered by media hoopla over this report..

According to the Census Bureau, May housing starts were estimated at a seasonally adjusted annual rate of 914,000, 6.8 percent (±10.1%)* above the revised April estimate of 856,000 and  28.6 percent (±14.4%) above the May 2012 rate of 711,000; April's figure was revised from 853,000 starts, a five month low...the asterisk leads one to a census footnote which says "it is uncertain whether there was an increase or decrease" of housing starts in May...what the numbers mean is that census took their rough estimate from field reps of 86,200 homes started in May, a figure which has a relative standard error of ±4,000, and extrapolated that into an annual estimate based on the normal relationship of May starts to annual starts...taking the margin of error into account, what that means is that Census is 90% confident that May's housing starts, were they continued at the same pace over the year, would result in somewhere between 883,838 and 1,068,466 million homes being started over the course of a year, obviously not a figure that can be reported with any accuracy.  The year over year change, 28.6% (±14.4%), has an even wider margin of error, but at least we can reasonably say that housing starts have increased by a decent number since last year...

  The data on building permits is the section of this report that is more useful, to the extent that the margin of error is small enough one can get an idea of the actual activity for permits, since about half of the permit-issuing places in the US are surveyed monthly. For May, census reports that building permits issued in May were at a seasonally adjusted annual rate of 974,000, which was 3.1 percent (±0.9%) below the revised April annual rate of 1,005,000, and 20.8 percent (±1.3%) above the estimate of a 806,000 rate from last May.  The annualized number was extrapolated for the May estimate of 93,400 permits and included 62,300 permits for single family homes, 2,300 permits for residences with 2 to 4 units, and 28,700 units in buildings with five units or more.  9,800 permits were issued in the Northeast, of which 5,400 were for single family homes; in the Midwest, there were 15,700 new permits, of which 11,000 were for single family homes; 46,100 permits were issued in the South, which included 32,100 single family homes, and 21,800 building permits were issued in the West, of which 13,800 were single family structures.. Since 98% of housing built in the US is in areas where a permit is required, this metric gives us a reasonable idea how much housing construction is intended Of course, applying for and getting a building permit does not guarantee that construction will start. Our FRED graph above shows monthly housing starts in blue and building permits in red as reported on an annualized basis; while individual monthly figures may not be dependable, there is clearly a rising trend for both housing starts and building permits issued..