Housing starts and building permits plunge in May

Home builders broke ground on fewer new homes nationwide in May, as a key element of the housing recovery lost momentum.

Housing starts fell 6.5% from April to a seasonally adjusted annual rate of 1,001,000, the Commerce Department said Tuesday. The drop was slightly worse than expected and comes after volatile multifamily construction surged in April, pushing starts to a five-month high.

Economists polled by Bloomberg News expected a 1.03 million annual rate in May. Last month saw the first decline in starts since January, although starts are 9.4% higher than May 2013.

The declines from April came across the board, as single family and multifamily starts both dropped.

The housing market has slowed recently as would-be buyers struggle to afford homes after prices surged last year.

“Consumers are still skittish, and the effects of last year’s sticker shock have not faded completely,” Brad Hunter, chief economist at researcher Metrostudy, said in a statement.

Builders say they’re struggling with other head winds, including a lack of ready-to-build lots and a shortage of skilled labor.

That has single family home builders pessimistic, although sentiment has improved a bit lately, according to a survey released Monday. The National Assn. of Home Builders’ gauge of builder confidence rose four points this month to 49. A reading above 50 means more builders view the market for new single family homes as good rather than poor.

Building permits, a gauge of future construction, fell 6.4% from April, although the decline came from plans for apartments and condos.

Permits for new single family homes rose 3.7% last month. Economists say the construction of such detached homes has a greater economic impact than the building of new apartments and condos.

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