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July 2023 » thefivestar.com 57 J O U R N A L July 2023 many to forget, the pace of sales in late 2020 and 2021, which averaged over 6 million at a seasonally adjusted annualized rate (SAAR) of sales, was anything but normal," Fleming said. "The pre-pandemic historic average pace of sales is closer to 5 million SAAR and, while the housing market today remains below that level, it is primarily a reflection of the historically low levels of inventory." MAY'S HOUSING STARTS RISE ABOVE EXPECTATIONS T he numbers are in from the U.S. Cen- sus Bureau and the U.S. Department of Housing and Urban Development (HUD) and the news is good, at least on a short-term scale. According to the joint report, privately owned housing units authorized by building permits in May were at a seasonally adjusted annual rate (SAAR) of 1,491,000, 5.2% above April's number of 1,417,000, but is down 12.7% year over year when it stood at a rate of 1,708,000. Single-family authorizations in May were at a rate of 897,000; this is 4.8% above April's SAAR revised figure of 856,000. Autho- rizations of units in buildings with five units or more were at a rate of 542,000 in May. Looking at housing starts, privately owned housing starts in May were at a recorded annual rate of 1,631,000. This is 21.7% (with a margin of error of +/-14.8%) above the revised April estimate of 1,340,000 and 5.7% above the May 2022 rate of 1,543,000. In addition, single-family housing starts in May were at a rate of 997,000; this is 18.5% above the revised April figure of 841,000—for buildings with five or more units or more was 624,000. On the topic of housing completions according to the report, privately-owned housing completions in May were at a SAAR of 1,518,000 or 9.5% above the revised April estimate of 1,386,000 and up 5% year over year from 1,466,000. Single-family hous- ing completions in May were at a rate of 1,009,000; this is 3.9% above the revised April rate of 971,000. The May rate for units in buildings with five units or more was 493,000. "In interpreting changes in the statistics in this release, note that month-to-month changes in seasonally adjusted statistics often show movements which may be irregular," the Census Bureau wrote in the report. "It may take three months to establish an underlying trend for building permit autho- rizations, six months for total starts, and six months for total completions." First American Economist Ksenia Pota- pov had this to say on May's housing starts report: "U.S. housing starts in May came in above consensus expectations at a seasonally adjusted annual rate of 1.63 million, which is 21.7% above the revised April estimate of 1.34 million and 5.7% above the May 2022 rate of 1.54 million," Potapov said. "Single-family construction surged, with starts up 18.5% month over month, which means more groundbreaking on new homes. Completions, which represent more supply added to the housing stock, were up 3.9% month over month, and permits, a leading indicator of future starts, were also up 4.8% month over month." "Homebuilder sentiment increased above 50 in June for the first time since July 2022, meaning builders consider conditions to be 'good' overall. All three components of the index—current sales conditions, sales ex- pectations in the next six months, and buyer traffic—increased." "This is the sixth consecutive month of increasing sentiment, a leading indicator for starts," Potapov continued. "Builders have good reason for a positive outlook. Exist- ing-home inventory remains limited as the majority of homeowners are rate-locked into their homes." "While affordability constraints weigh on demand, it is a lack of supply that is the lim- iting factor in today's housing market. There is plenty of demand on the sidelines, and prospective buyers are increasingly turning to homebuilders. As a result, new homes, which have historically made up approximately 11% of total inventory, now make up nearly 30%." "Builders don't even need to break ground on new homes to deliver more sup- ply," Potapov concluded. "In May, there were 164,000 more single-family homes under construction than in February 2020—a 31% increase. As builders chip away at the back- log of homes under construction, single-fam- ily completions should continue to trend higher."