Drop in housing starts shows industry may weigh on growth
Three straight months of declines in new-home construction show homebuilding may weigh on second-quarter growth, Commerce Department data showed Friday.
Residential starts decreased 5.5% to a 1.09 million annualized rate (the estimate was 1.22 million), the weakest since September. Starts in April were revised down to 1.16 million, while March figures were also weaker than last reported. Permits, a proxy for future construction, fell 4.9% to a 1.17 million rate, the lowest since April 2016.
May starts were pushed lower by declining construction in the South, which reached the weakest level since October 2015, and in the Midwest. Construction of single-family properties dropped 3.9% to the lowest since September, while ground-breaking on multifamily units declined for a fifth straight month.
Shortages of skilled workers and available lots have weighed on the industry even as Americans remain upbeat about home buying. Builders have become a bit less buoyant than earlier in the Trump administration, when they registered the highest optimism since 2005, data earlier this week from the National Association of Home Builders and Wells Fargo showed.
"Homebuilders continue to caution that construction may be limited by a lack of available lots or skilled labor, but the market fundamentals suggest that demand should remain solid," Tom Simons, an economist at Jefferies LLC in New York, said in a note before the data release.
The report shows a wide margin for error, with a 90% chance that last month's figure fell between a 17.4% drop to a 6.4% advance. Construction of single-family houses fell to a 794,000 rate from 826,000 in April. Groundbreaking on multifamily homes, such as apartment buildings, dropped 9.7% to an annual rate of 298,000.