U.S. Housing Starts Unexpectedly Tumble To Nearly Four-Year Low In May

(RTTNews) - A report released by the Commerce Department on Thursday unexpectedly showed a steep drop in new residential construction in the U.S. in the month of May.

The Commerce Department said housing starts plunged by 5.5 percent to an annual rate of 1.277 million in May after surging by 4.1 percent to a revised rate of 1.352 million in April.

Economists had expected housing starts to climb by 0.7 percent to an annual rate of 1.370 million from the 1.360 million originally reported for the previous month.

With the unexpected decrease, housing starts fell to their lowest level since hitting an annual rate of 1.254 million in June 2020.

Single-family housing starts dove by 5.2 percent to an annual rate of 982,000, while multi-family housing starts plummeted by 6.7 percent to an annual rate of 295,000.

"The good news is a slowdown in residential construction should further ease pricing pressures in commodities such as lumber," said Jeffrey Roach, Chief Economist for LPL Financial. "Softer demand and easing inflation should allow the Fed to start cutting rates later this year."

The report also said building permits slumped by 3.8 percent to an annual rate of 1.386 million in May after tumbling by 3.0 percent to a rate of 1.440 million in April.

Building permits, an indicator of future housing demand, were expected to increase by 0.7 percent to an annual rate of 1.450 million.

With the unexpected decrease, building permits dropped to their lowest level since hitting an annual rate of 1.338 million in June 2020.

Single-family building permits fell by 2.9 percent to an annual rate of 949,000, while multi-family building permits plunged by 5.6 percent to an annual rate of 437,000.

A separate report released by the National Association of Home Builders on Wednesday unexpectedly showed a continued deterioration in U.S. homebuilder confidence in the month of June.

The report said the NAHB/Wells Fargo Housing Market Index fell to 43 in June after slumping to 45 in May, while economists had expected the index to come in unchanged.

With the unexpected decease, the housing market dropped to its lowest level since hitting 37 last December.