U.S. Housing Starts Pull Back Sharply In May

(RTTNews) - The Commerce Department released a report on Wednesday showing a steep drop by new residential construction in the U.S. in the month of May.

The report said housing starts plunged by 9.8 percent to an annual rate of 1.256 million in May after jumping by 2.7 percent to a revised rate of 1.392 million in April.

Economists had expected housing starts to edge down to an annual rate of 1.360 million from the 1.361 million originally reported for the previous month.

The much bigger than expected decrease by housing starts largely reflected a nosedive by multi-family housing starts, which plummeted by almost 30 percent to an annual rate of 332,000.

On the other hand, the Commerce Department said single-family housing starts rose by 0.4 percent to an annual rate of 924,000.

The report also said building permits slumped by 2.0 percent to an annual rate of 1.393 million in May after tumbling by 4.0 percent to a revised rate of 1.422 million in April.

Building permits, an indicator of future housing demand, were expected to rise to an annual rate of 1.430 million from the 1.412 million originally reported for the previous month.

While building permits for single-family homes dove by 2.7 percent to an annual rate of 898,000, building permits for multi-family homes fell by 0.8 percent to an annual rate of 495,000.

"Building permits point to a slower pace of construction, while May retail sales data suggested home improvement spending is slowing," said Matthew Martin, Senior US Economist at Oxford Economics. "Risks to our downbeat residential investment forecast are to the downside."

A separate report released by the National Association of Home Builders on Tuesday showed homebuilder confidence in the U.S. has unexpectedly seen a continued deterioration in the month of June.

The report said the NAHB/Wells Fargo Housing Market Index fell to 32 in June from 34 in May, while economists had expected the index to rise to 36.

With the unexpected decrease, the housing market index dropped to its lowest level since plunging to 30 at the start of the Covid pandemic in April 2020.