Housing Starts Jump 5 percent in May

The pace of US housing construction rose more than expected in May after three months of declines, but permits for future projects fell.

Economists said the data confirm a gradual slowing of the housing sector.

The Commerce Department said housing starts rose 5 % in May to a 1,957,000 unit annual pace from an upwardly revised 1,863,000 unit rate in April.

However, permits for future groundbreaking, an indicator of builder confidence, fell 2.1 percent to a 1,932,000 unit pace in May, the lowest since November 2003 and the first time since January that total housing permits fell below starts.

Compared with a year earlier, May housing starts were down 3.8 percent, with single-family starts down 7.6 percent.

After a five-year rally that sent prices soaring and shattered sales and construction records, the US housing market has shown signs of sustained cooling since mortgage rates began to rise last year.

Economists had expected May housing starts to stabilize at a 1,850,000 unit pace, edging above April's initially reported 1,849,000 unit rate. Mild weather in January had prompted builders to bring forward some projects, poaching starts from February, March and April.

The May uptick should not prompt inflationary concerns at the Federal Reserve, which will consider whether to raise interest rates next week.

Construction starts for single-family homes rose 2.1 % to a 1,586,000 unit pace, while groundbreaking on multifamily buildings with five or more units rose 25.4 %. Starts on structures with two or more units rose 19.7 % last month.

Housing starts rose 15.8 % in the West, 8.5 %in the South and 1.7 percent in the Northeast. They fell 15.8 %in the Midwest.