US housing starts drop for 3rd straight month

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Economists polled by Reuters had forecast groundbreaking activity rising to a rate of 1.22 million units last month.

Homebuilding fell 2.4% on a year-on-year basis.

The housing data added to weak reports on retail sales, manufacturing production and inflation in tempering expectations of a sharp acceleration in economic growth in the second quarter. Single-family home construction has lost momentum since racing to near a 9-1/2-year high in February.

Housing completions were at a seasonally adjusted annual rate of 1.164 million, up 5.6% from the revised April estimate and 14.6% above the May 2016 rate.

New residential construction in the USA unexpectedly showed a steep drop in the month of May, according to a report released by the Commerce Department on Friday.

Single-family homebuilding, which accounts for the largest share of the residential housing market, decreased 3.9 percent to a 794,000 unit-pace last month, also the lowest level in eight months.

"As the housing market strengthens and more buyers enter the market, builders continue to express their frustration over an ongoing shortage of skilled labor and buildable lots that is impeding stronger growth in the single-family sector", Dietz said. Starts fell 8.9% in the South and 4.9% in the West. Multi-family housing starts have now fallen for five straight months.

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Building permits, an indicator of upcoming construction, tumbled 4.9 percent nationwide to 1.17 million.

Ian Shepherdson of Pantheon Macroeconomics said the May declines were driven to a large extent by volatility in multi-unit construction, with starts in that segment down almost 10 percent.

Economists had expected housing starts to rise to 1.223m, alongside a gain in permits to 1.25m.

Home builders are plagued with labor and lot shortages, and it's causing their confidence in the single-family market to waver, according to new data from the National Association of Home Builders (NAHB) and Well Fargo released this week.

Single-family building permits fell 1.9 percent to a 779,000 unit-rate.

Home construction is still 3.2 percent higher year-to-date, but that increase is too small to keep up with demand.

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