US Housing Starts Missed Expectations in May
US housing starts missed in May as the construction of multi-family housing units dropped, but gains in building permits signaled a possible rebound that would support economic growth in Q-2.
Groundbreaking fell 0.3% to a seasonally adjusted annual pace of 1.16-M units, the US Commerce Department said Friday. May’s decline followed a 4.9% spike in April. Building permits rose 0.7% to a 1.14-M unit rate in May.
Though the pace of home building has slowed after a solid Q-1, housing remains a pillar of strength for the economy. Residential construction added almost 0.06 of a percentage point to Q-1 GDP, the biggest contribution in more than 3 years.
Economists polled by had forecast housing starts falling to a 1.15-M-unit pace last month.
Groundbreaking on single-family homes, the largest segment of the market, rose 0.3% to a 764,000-unit pace last month. Single-family starts in the American South, where most of the home building takes place, rose 2.6% to their highest level since December 2007.
Single-family starts in the Northeast region surged 12.7%. In the West, groundbreaking on single-family housing projects rose 1.9%. But single-family starts in the Midwest tumbled 14.7% to a 6-month low.
Further gains in single-family starts are likely after a survey Thursday showed confidence among home builders rose to a 5-month high in June amid optimism over sales and buyer traffic. But single-family home construction continues to run ahead of permits, which could limit the rise in the short term.
Housing starts for the volatile multi-family segment fell 1.2% to a 400,000-unit pace last month, following an 11.9% rise in April. The multi-family segment of the market continues to be supported by strong demand for rental accommodation as some Americans remain wary of owning homes years after the housing market collapse.
Multi-family home construction is also being aided by rising household formation as a fairly strong labor market increases employment opportunities for young adults.
The government reported Thursday that rents in May posted their biggest gain since February 2007.
Permits for the construction of single-family homes fell 2.0% last month to a 726,000-unit rate. But single-family permits in the South rose 0.8% to a 5-month high. Multi-family building permits increased 5.9% to a 412,000-unit pace in May.
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