Housing Starts Turn Ugly in Month

Housing starts fell 10% in May to an annualized rate of 593,000 units, far below the expectations of many analysts who were looking for a consensus reading of 648,000. The Commerce Department reported that applications for new building permits, a sign of future activity, also declined, sinking 5.9% to an annual rate of 574,000, the lowest level in a year. Meanwhile, April's numbers were revised downward to 659,000 from 672,000. According to a report by Barclays Capital, "The weakness in housing starts today was driven entirely by single family starts, which fell to 17.2%, to 468,000 from 565,000, completely reversing the 5.6% gain in April." There was some good news: multifamily rose 33% in May to 125,000 from 94,000. Regionally, the decline was concentrated in the South (21.3%) and the Northeast (6.3%). Analysts say builders are scaling back their construction plans now that federal tax credits for first-time and certain move-up buyers have expired.