U.S. housing starts fell in May after a hefty increase the prior month, but a surge in permits for future construction to a near eight-year high suggested the pullback was temporary and pointed to underlying strength in housing.
Groundbreaking dropped 11.1 percent to a seasonally adjusted annual pace of 1.04 million units, the Commerce Department said on Tuesday. That partially reversed April’s large gain. April starts were revised up to a 1.17 million-unit rate, the highest since November 2007.
Economists polled by Reuters had forecast housing starts falling to a 1.10 million-unit pace last month after a previously reported 1.14 million-unit rate.
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Permits for future home construction increased 11.8 percent to a 1.28 million-unit rate, the highest since August 2007. Permits have been above a 1 million-unit pace since July.
Home building has regained ground lost during a harsh winter and there are signs activity will accelerate this year as tightening labor market conditions spur strong wage gains and encourage young adults to move from their parents’ basements.
A survey on Monday showed confidence among builders vaulting to a nine-month high in June, with measures of current sales and buyer traffic increasing solidly.
Groundbreaking fell in all four regions, declining a steep 26.5 percent in the Northeast after April’s spectacular gains. Starts in the South, where most of the home building takes place, fell 5.0 percent