US housing starts drop for 3rd straight month

U.S. home construction fell in May for the third straight month, with the pace of building hitting its lowest level since September, the Commerce Department reported on Friday (Jun 16). The Northeast maintained its rate of building from April at 87k, while the West recorded a meagre rise of 4k in builds. Permits last month were down 10.4% for buildings with multiple units and down 1.9% for single-family homes.

According to the Housing Market Index released by the NAHB and Wells Fargo on Thursday, builder sentiments surrounding now single-family home sales, expected sales in the next six months, and rate of traffic were all down for the month.

On a year-on-year basis, the homebuilding fell by 2.4%.

Total housing starts fell 5.5 per cent from April to a seasonally adjusted annual rate of 1.092 million, which meant the pace of construction dropped 2.4 per cent below the same month of past year. With the unemployment rate at a 16-year low of 4.3 percent, workers' wages are gradually rising. This is 5.6% above the revised April estimate of 1,102,000 and is 14.6% above the May 2016 rate of 1,016,000.

Regionally, overall permits rose 3.3 percent in the Northeast.

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. This is 4.9% below the revised April rate of 1,228,000 and is 0.8% below the May 2016 rate of 1,178,000.

Total U.S. housing starts turned in another disappointing performance in May, with single-family starts falling 3.9% to a 794,000-unit annual pace and multifamily starts falling 9.7%.

Lawrence Yun, chief economist at the National Association of Realtors, said the May numbers pointed to "a housing emergency", with consumers facing higher rents and home prices, if supply and demand drifted further apart.

More evidence of a labor shortage might be visible in building permits, too.

With rental increases appearing to have leveled off after strong gains in the last few years, there is likely limited room for strong growth in the construction of multi-family homes.

  • Zachary Reyes