Housing Starts Drop Despite Prior Months Upward Revision

New home building in the United States took an unexpected dip in May but data from the two months prior have been revised higher and building permits are up. This combination of data suggests the housing market might be gaining some support, at least, from an even more pronounced decline in mortgage rates. 

Specifically, housing starts slipped nearly 1 percent, to a seasonally adjusted annual rate of 1.269 million units, last month. This was mostly affected by a decline in single-family housing construction. According to data from the United States Department of Commerce, data for April has been revised to show that homebuilding is rising at a pace of 1.281 million units instead of the rate of 1.235 million units, as had been previously reported.  

In addition, it appears that housing starts in March are also better than had been originally estimated.  Some economists, for example, had forecast housing starts would inch upward at a pace of 1.239 million units, in May.  But single-family housing starts dipped, in fact, through the Northeast, the Midwest, and the West. In fact, the South is the only reason to see growth; which makes sense as this where most homebuilding in the US occurs. 

But although housing starts are down, building permits are up, rising 0.3 percent—to a rate of 1.294 million—in May.  This is the second consecutive month of permit increases in a year where they have been pretty weak, overall.  Still, single-family housing authorizations, in May, came in at 815,000, which is 3.7 percent higher than the revised April figure of 786,000.  Also, May authorizations for buildings with five or more units grew at a rate of 442,000. 

Apparently the housing market has had a bit of a rough year and this, consequently, has been dragging down a significant portion of economic growth for at least the past five quarters.  The overall housing sector is being throttled by shortages in both land and labor. This, of course, makes it harder for builders to take full advantage of lower borrowing costs. Altogether, then, this contributes to a market that continues to squeeze through a surplus of inventory.