U.S. Housing Starts Fall 6.5% In May After Surging Higher In April

(RTTNews) - After reporting a sharp jump in new residential construction in the U.S. in the previous month, the Commerce Department released a report on Tuesday showing that housing starts pulled back by more than expected in the month of May.

The report said housing starts fell 6.5 percent to an annual rate of 1.001 million in May after jumping 12.7 percent to a rate of 1.071 million in April. Economists had expected starts to drop to a rate of 1.030 million.

The pullback off the five-month high set in the previous month reflected decreases in both single-family and multi-family starts.

Single-family housing starts fell 5.9 percent to a rate of 625,000, while multi-family housing starts slid 7.6 percent to a rate of 376,000.

Additionally, the Commerce Department said building permits dropped 6.4 percent to an annual rate of 991,000 in May from the downwardly revised April rate of 1.059 million.

Building permits, an indicator future housing demand, had been expected to dip to 1.050 million from the 1.080 million originally reported for the previous month.

Multi-family permits tumbled 19.5 percent to a rate of 372,000 in May after surging up 15.5 percent to a rate of 462,000 in April.

On the other hand, the report said single-family authorizations climbed 3.7 percent to a rate of 619,000 in May from the revised April figure of 597,000.

Despite the monthly decrease, the Commerce Department noted that housing starts in May were up by 9.4 percent compared to the same month a year ago. Meanwhile, building permits were down 1.9 percent year-over-year.

Gregory Daco, Lead U.S. Economist at Oxford Economics, said, "The ray of light in this report was the rise in single-family permits, although they remain lower than last year."

"We continue to believe in a gradual housing rebound, but the downside risk for housing is growing," he added. "So long as we don't see a pick-up in labor compensation, potential homebuyers are likely to stay on the sidelines."

On Monday, the National Association of Home Builders released a separate report showing that homebuilder confidence has improved by more than expected in the month of June.

The report showed that the NAHB/Wells Fargo Housing Market Index climbed to 49 in June from 45 in May. Economists had expected the index to edge up to 47.

While the index rose to its highest level since January, the NAHB noted that it remains one point shy of the threshold for what is considered good building conditions.