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Housing starts in the United States were rejected in May

WASHINGTON – The housing construction economy in the United States declined in May, signaling a further weakness in the housing market.

Housing starts fell 0.9% in May from the previous month, settling at a seasonally adjusted annual rate of 1.269 million euros, said Tuesday the Commerce Department. This was a more pronounced fall than expected by economists by 0.4%.

The report follows a drop in homebuilders' confidence in the United States in June, with builders expressing concerns about rising construction costs and trade-related issues. The housing market index of the National Association of Home Builders fell to 66 this month, up from 66 in May, the business group announced Monday.

Tuesday's housing data, "as well as a host of other economic factors, could weigh on the Federal Reserve's tariff scales with respect to rate cuts, which could potentially boost the pace of interest rates." economy and the housing market, "said John Pataky, senior vice president of TIAA Bank.

Fed officials will meet on Tuesday and Wednesday in Washington and should debate the issue of interest rate cuts if the economic outlook darkens.

The latest version of the Department of Commerce had some positive points. Residential building permits, which can indicate the importance of construction work, rose by 0.3% compared to April, reaching an annual rate of 1.294 million euros. This is the highest monthly growth rate since December. The pace of housing starts in April was revised upwards, another positive sign.

Data on housing starts are volatile from one month to the next and can be subject to significant revisions. The 0.9% drop in housing starts in May was accompanied by a margin of error of 12.9 percentage points.

Housing construction experienced a more general slowdown due to the difficulty of high prices and low inventories in the housing sector, despite the strength of the labor market and rising incomes. Housing starts were down 4.7% from May last year.

Loan costs have fallen in recent weeks, which could help the sales season this summer. According to Freddie Mac, a 30-year fixed-rate mortgage averaged 3.82% for the week ended Thursday, near historical lows and 4.62% a year ago. The National Association of Realtors will release data on existing home sales for May, Friday.

Write to Harriet Torry at harriet.torry@wsj.com

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