US housing starts rise faster than expected

The pace of US housing construction was faster than expected last month after three months of declines as ground-breaking on both single-family and multifamily units jumped — but permits for future projects fell.

The US commerce department said May housing starts rose 5% to 1,957-million units a year compared with an upwardly revised 1,863-million unit rate in April.

Economists had expected housing starts to stabilise at a 1,85-million unit pace last month, edging above April’s initially reported 1,849-million unit rate.

Construction starts for single-family homes rose 2,1% to a 1,586-million unit pace, while ground-breaking on multifamily buildings with five or more units rose 25,4%. Starts on structures with two or more units rose 19,7%.

“The housing market is responding to general weakness in sales. The single-family side is weaker than a year ago.

“Overall starts went up because of the five-plus family category,” said David Berson, chief economist for Fannie Mae in Washington.

However, permits for future ground-breaking, an indicator of builder confidence, fell 2,1% to a 1,932-million unit pace, the lowest since November 2003 and the first time since January that total housing permits fell below starts.

Economists expected housing permits to fall to an annual pace of 1,95-million units last month after an unrevised 1,973 million rate in April. May permits for single-family homes fell 2,1% to a 1,466-million unit pace, the lowest in nearly three years. Permits for buildings with two or more units also fell 2,1% last month, while permits for buildings with five or more units fell 5,2%.

US treasuries dipped slightly after the higher-than-expected May starts. The dollar showed little reaction to the data. US stock index futures inched up after the report, with S&P 500 futures up 1,3 points.

David Wyss, chief economist at Standard & Poor’s Ratings in New York, said the data showed the housing market was holding up better than expected. “Some of what happened in March and April was due to weather,” he said. “This suggests less of a slowing economy and the Fed’s concern about inflation is still there. This is one more reason to jack up interest rates.

“This is going to be a negative for the market.”

On Monday, the National Association of Home Builders said US home builder sentiment had sunk to its lowest level in more than 11 years this month as rising interest rates made houses less affordable and curbed speculative buying.