Building of homes declines in May
Housing starts said to fall 0.9%
WASHINGTON — U.S. home construction slipped a bit in May as a sharp drop in single-family construction was only partially offset by a rise for apartments.
The Commerce Department said Tuesday that construction was started at a seasonally adjusted annual rate of 1.27 million homes and apartments, a decline of 0.9% from April, when construction starts had risen a strong 6.8%. Applications for building permits, a sign of future activity, edged up 0.3% in May to an annual rate of 1.29 million.
Construction of singlefamily homes fell 6.4% in May while construction of apartments rose 10.9%.
Falling mortgage rates are expected to help boost home construction and sales in the coming months and help offset problems such as a shortage of building lots and a lack of skilled construction workers.
The latest National Association of Home Builders/Wells Fargo survey showed builder confidence has dipped to a still-solid reading of 64 this month, down from 66 in May. Sentiment levels have held in a range of the low to mid-60s for the past five months.
“Despite lower mortgage rates, home prices remain
somewhat high relative to incomes, which is particularly challenging for entrylevel buyers,” said Robert Dietz, chief economist for the homebuilders group.
The May report on construction starts showed declines in every region of the country except the South, where building starts rose 11.2%. Construction took the sharpest fall in the Northeast, declining 45.5%, while starts were down 8% in the Midwest and 2.4% in the West.
Residential construction has been a drag on the economy over the past year. But economists are forecasting that it will turn around in the coming months, with home construction boosting growth in the second half of this year and into next year, spurred by falling mortgage rates.
Reports due over the next week are predicted to show that existing home sales, which make up the majority of the U.S. housing market, rose in May and that the pace of new home sales also increased.
“Although housing prices continue to show signs of cooling and some other housing indicators have wobbled in recent months, this morning’s starts and permits data suggest little cause for immediate concern,” JPMorgan Chase’s Jesse Edgerton wrote in a note. Still, Edgerton said, there’s “little sign of a decisive pickup.”
Bloomberg economists Yelena Shulyatyeva and Carl Riccadonna wrote that “Wet weather conditions in the Midwest and cost increases for building materials amid higher tariffs will limit nearterm progress in housing construction.”
“Housing is unlikely to contribute to economic growth to any meaningful degree either this year or in this business cycle,” they said. Information for this article was contributed Martin Crutsinger of The Associated Press, and by Reade Pickert of Bloomberg News.