US housing starts drop for 3rd straight month

Reuters

For the third-straight month, housing starts missed analyst expectations, according to MarketWatch, as economists had predicted a rate of 1.23 million starts for May. Housing starts rose slightly in the West.

Economists blame the moderation on supply constraints rather than demand for housing, which remains underpinned by a strong labor market. Single-family home construction has lost momentum since racing to near a 9-1/2-year high in February.

Both permits for construction of privately-owned housing units and beginning construction in May were well below expectations, the second consecutive month in which both declined.

Homebuilding fell 2.4% on a year-on-year basis.

Housing starts dropped 5.5% in May from the prior month to a seasonally adjusted annual rate of 1.092 million, the Commerce Department said Friday.

The February annualized rate of single-family USA housing starts, 877,000, was the fastest monthly pace since the Great Recession.

"Still, despite the modest drag from residential investment this quarter, we expect economic growth to clock in at just over 3 percent", said TD Economics. With the unemployment rate at a 16-year low of 4.3 percent, workers' wages are gradually rising.

Versus the same month one year ago, starts were down by 2.4% while permits were 0.8% lower.

In May, single-family starts surged in the Northeast and Midwest, but tumbled in the South and West. House completions rose 5.6 percent to a 1.16 million-unit rate, still below the 1.5 million to 1.6 million units range that realtors say is needed to address the chronic housing shortage.

Still, May's slowdown in single-family starts - along with continued declines in the multifamily segment and building permit authorizations - point to headwinds from the lot and labor shortages taking their toll on stronger activity.

Mortgage rates have risen but remain low by historical standards.

Home construction is still 3.2 percent higher year-to-date, but that increase is too small to keep up with demand. Permits also declined both at the single-family and multifamily level, suggesting there is more at play than some temporary statistical issue.

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