A report released by the Commerce Department on Thursday showed new residential construction in the U.S. plunged by much more than expected in the month of May.
The Commerce Department said housing starts tumbled by 14.4 percent to an annual rate of 1.549 million in May after jumping by 5.5 percent to a revised rate of 1.810 million in April.
Economists had expected housing starts to decrease by 1.3 percent to an annual rate of 1.701 million from the 1.724 million originally reported for the previous month.
With the much bigger than expected decline, housing starts dropped to the lowest annual rate since hitting 1.505 million in April of 2021.
Single-family housing starts dove by 9.2 percent to an annual rate of 1.051 million, while multi-family starts plummeted by 23.7 to a rate of 498,000.
“We expect housing starts to lose some momentum as 2022 progresses, as a sharp rise in mortgage rates sidelines some buyers and as builders have become more cautious,” said Nancy Vanden Houten, Lead Economist at Oxford Economics.
She added, “We think a shortage of supply and a record backlog of starts will keep activity from plummeting, but the May data indicate the risk to our forecast is to the downside.”
The report also showed building permits slumped by 7.0 percent to an annual rate of 1.695 million in May after falling by 3.0 percent to a revised rate of 1.823 million in April.
Building permits, an indicator of future housing demand, were expected to decline by 1.9 percent to an annual rate of 1.785 million from the 1.819 million originally reported for the previous month.
Single-family permits tumbled by 5.5 percent to an annual rate of 1.048 million, while multi-family permits plunged by 9.4 percent to a rate of 647,000.
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