U.S. housing starts fall in May

The U.S. housing starts dropped 0.9 percent in May to 1.27 million units from an upwardly revised 1.28 million units in April. The fall was mainly seen in the single-family segment that dropped 6.4 percent to 820k. The more volatile multi-family segment saw a rise of 10.9 percent to 449k. The fall was mainly seen in the single-family segment, which dropped 6.4 percent to 820k.

Permits rose 0.3 percent in May to 1.3 million. Single-family permits rose 3.7 percent, breaking five straight months of falls, but multi-family permits dropped 5 percent, reversing much of the gain seen in the prior month.

Regions, wise, starts dropped across all regions but the South, which rose 11.2 percent. The Northeast saw a fall of 45.5 percent, whereas the Midwest and the West recorded a fall of 8 percent and 2.4 percent, respectively.

Housing starts dropped in May following a good show in the past two months. Increased construction costs might be part of the story. The tight labor market has also driven up wages for construction workers, adding to margin pressures, noted TD Economics in a research report.

“Declining mortgage rates and rising wages have supported housing affordability and there are nascent signs this is showing up in greater housing demand. With low vacancy rates, this should ultimately lead to increases in construction, though elevated uncertainty and rising costs may slow this process”, added TD Economics.

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