New-home construction dropped for the third straight month as the housing industry's contribution to economic growth may be less than expected in the second quarter.
Housing starts declined 5.5 percent in May to an annualized rate of 1.092 million from April’s revised pace of 1.156, reported the Commerce Department on Friday. April had initially been listed at 1.172 million. It was the weakest rate of new building since September and 10 percent below the 1.215 median forecast.
Building permits, a gauge of future projects, fell 4.9 percent in May to a 1.169 million yearly pace. This was the lowest rate of requests since April 2016.
Residential groundbreaking have slipped 15.2 percent from their most recent high of 1.288 million in February and are off 17.8 percent from their post-recession high of 1.328 million last October.
After reaching a peak of 2.273 million in January 2006 at the height of the housing bubble, starts endured a three year plunge before bottoming at 0.473 million in April 2009. Construction did not begin to recover until the second half of 2013 and crossed above 1 million line that December.
For comparison, in January 2000 the average annual rate of new home construction over the prior 30 years was 1.5 million units. Despite several years of the lowest home mortgage rates on record the rate of new home building in the U.S. has not regained the rate of 17 years ago, when the U.S. population was considerable lower.
The Atlanta Federal Reserve cut its estimate for second quarter GDP growth to 2.9 percent on Friday from 3.2 percent on June 14th citing a decline in real residential investment expansion from 1.8 percent to 0.4 percent.
The initial second quarterAtlanda Fed GDP estimate on May 1st was 4.3 percent, 2.9 percent is the lowest estimate thus far from the bank’s GDPNow program.
Starts declined in the Midwest and the South, which sank to the lowest level since October 2015.
Construction of single-family residences fell 3.9 percent to a 794,000 annual rate from 826,000in April, for the slowest pace since September. Multifamily starts decreased 9.7 percent to a yearly rate of 298,000. It was the fifth monthly decline in row.
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