U.S. permits for future home construction surged to a near eight-year high in May, suggesting a building up of momentum in housing and the broader economy after a dismal performance at the start of the year. While housing starts fell last month, that followed a robust gain in April and groundbreaking remained at levels consistent with a strengthening housing market.
Housing’s improving fortunes, marked by rising home prices and sales, are likely to be acknowledged by Federal Reserve officials, who started a two-day policy meeting on Tuesday. Policymakers have repeatedly singled out housing as one of the weak spots in the economy. The U.S. central bank is expected to raise interest rates later this year. It has kept its short-term lending rate near zero since December 2008.
“Residential construction has been the laggard in this recovery and the moon shot surge in new permits today means the final piece of the recovery puzzle is now falling into place,” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York. Building permits jumped 11.8 percent to a seasonally adjusted annual pace of 1.28 million units, the highest since August 2007, the Commerce Department said. It was the second straight month of increase. Permits have been above a 1 million-unit pace since July.