New home construction in the United States fell sharply in May, with housing starts posting a much steeper decline than economists had anticipated, according to data released Tuesday by the Commerce Department.
Housing starts dropped 15.4% during the month to a seasonally adjusted annual rate of 1.177 million units. The decline followed an 8.5% decrease in April, which was revised to an annual rate of 1.392 million units.
Economists had forecast a smaller decline of 2.4%, with housing starts expected to reach an annual pace of 1.430 million units. The April figure was originally reported at 1.465 million units.
The report points to continued weakness in residential construction activity as builders navigate a challenging environment marked by elevated borrowing costs and softer housing demand.
Building Permits Also Move Lower
The Commerce Department reported that building permits, a key indicator of future construction activity, also declined during May.
Permits fell 0.7% to an annual rate of 1.413 million units after rising 4.4% in April to a revised 1.432 million units.
Analysts had expected permits to decrease by 1.5% to an annual rate of 1.420 million units. April’s reading was initially reported at 1.442 million units.
Although the decline in permits was less severe than expected, the latest figures suggest that momentum in the housing sector remains subdued, with both current construction activity and future building plans showing signs of moderation.