U.S. Housing Starts Dropped 5.5% in May, Hitting 8-Month Low
The latest housing report shows housing starts slumped to an annual rate of 1.09 million in May from the revised April estimate of 1.16 million.
WASHINGTON — Homebuilding in the U.S. continues to show signs of sluggishness as housing starts dropped for a third straight month in May to the lowest level in eight months as construction activity declined broadly, according to the latest joint report released from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
Housing starts fell 5.5% to a seasonally adjusted annual rate of 1.09 million units in May from the revised April estimate of 1.16 million, the Commerce Department reported on Friday. That marks the lowest level since September 2016. Economists polled by Reuters had forecast housing starts increasing to a rate of 1.22 million units last month.
Homebuilding fell 2.4% on a year-on-year basis. Weak homebuilding activity suggests housing could weigh on economic growth in the second quarter. Housing has contributed to gross domestic product for two straight quarters.
Single-family homebuilding, which accounts for the largest share of the residential housing market, decreased 3.9% to a pace of 794,000 units last month, also the lowest level in eight months. Single-family home construction has slowed since rising to more than a 9-year high in February.
In May, single-family starts rose 12.5% in the Northeast and 9.5% in the Midwest. However, other regions stumbled. Starts fell 8.9% in the South and 4.9% in the West.
Single-family building permits fell 1.9% to a pace of 779,000 units. The report also showed that multifamily housing starts have now fallen for five straight months. Last month, starts for this volatile housing segment declined 9.7% to a rate of 298,000 units.
According to the latest National Association of Home Builders/Wells Fargo Housing Market Index released on Thursday, homebuilder confidence fell slightly in June.
Sentiment dropped two points to 67 from May’s reading of 69, according to the index.
“Builder confidence levels have remained consistently sound this year, reflecting the ongoing gradual recovery of the housing market,” says NAHB Chairman Granger MacDonald, a homebuilder and developer from Kerrville, Texas.
The index gauges builder perceptions of current single-family home sales and sales expectations for the next six months. The survey also asks builders to rate traffic of prospective buyers. Any number over 50 indicates that more builders view conditions as good than poor.
“As the housing market strengthens and more buyers enter the market, builders continue to express their frustration over an ongoing shortage of skilled labor and buildable lots that is impeding stronger growth in the single-family sector,” says Robert Dietz, NAHB chief economist.
Confidence in current sales conditions fell two points to 73, the index for sales expectations in the next six months dropped two points to 76 and the component measuring buyer traffic slipped two points to 49.
Regionally, the three-month moving averages for the Midwest and the South each fell one point to 67 and 70, respectively.
The Northeast and West each shed two points, posting confidence marks of 46 and 76, respectively.
Lawrence Yun, chief economist for the National Association of Realtors, was dismayed by the housing latest report, issuing the following statement: “Housing shortages look to intensify and may well turn into a housing emergency if the discrepancy between housing demand and housing supply widens further.”
Yun says falling housing starts and housing permits in May are puzzling given the lack of homes for sale and the quick pace of selling a newly-constructed homes.
“Meanwhile, job creations of a consistent 2 million a year will push up housing demand further,” he says. “One thing that moving up is the housing costs for consumers: higher home prices and higher rents.”
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