US housing starts fall slightly in May; homebuilding activity outlook remains favorable

Housing starts in the US dropped slightly by 3,000 units in May to 1,164k as compared with the consensus projections of a deeper decline to 1,150k. Meanwhile, April’s figures were revised downward, subtracting 5,000 from the total month’s tally, whereas March’s figures were upwardly revised, adding 14,000.

The volatile multifamily sector, which registered a decline of 5,000 units, mainly led to the drop in the overall figure in May. However, this drop was slightly countered by the single-family sector that rose 2000 in May.

US homebuilding pace slowed slightly in May; however the headline number continues to be above the six-month and 12-month averages of 1,158k and 1,149k respectively. The US homebuilding activity outlook continues to be favorable as it is underpinned by an increasing tight labor market, rebounding consumer balance sheets, low interest rates and a gradual improvement in household formation, said TD Economics in a research report.

May’s building permits were a tad lower than projections; however, the headline number continued to be strong, increasing 8,000 units to 1,138k. Permits for multifamily segment rose 23,000; however, this was partly countered by a decline in permits for single family segment that dropped by 15,000.

Overall permitting activity rose in May, implying that homebuilders expect a gradual rebound in activity in the summer months, noted TD Economics. This is in line with the NAHB’s housing market index that climbed to a seasonally adjusted level of 60 in June, highest reading since January.

Region wise, building activity rose in the West and South, rising by 34,000 and 9000 respectively. However, the gains were countered by declines in the Midwest and the Northeast.