2018.06.1909:21:00UTC+00U.S. Housing Starts Jump More Than Expected But Building Permits Plummet

While the Commerce Department released a report on Tuesday showing a much bigger than expected jump in new residential construction in the U.S. in the month of May, the report also showed a much steeper than expected drop in building permits.

The report said housing starts soared by 5.0 percent to an annual rate of 1.350 million in May after tumbling by 3.1 percent to a revised rate of 1.286 million in April.

Economists had expected housing starts to climb by 1.8 percent to a rate of 1.310 million from the 1.287 million originally reported for the previous month.

With the substantial increase during the month, housing starts reached their highest annual rate since hitting 1.354 million in July of 2007.

The bigger than expected spike in housing starts reflected significant increases in both single-family and multi-family starts.

Single-family starts shot up by 3.9 percent to a rate of 936,000, while multi-family starts surged up by 7.5 percent to a rate of 414,00.

Meanwhile, the Commerce Department said building permits plunged by 4.6 percent to an annual rate of 1.301 million in May after falling by 0.9 percent to a revised rate of 1.364 million in April.

Building permits, an indicator of future housing demand, had been expected to edge down by 0.1 percent to a rate of 1.350 million from the 1.352 million originally reported for the previous month.

The report said single-family permits tumbled by 4.6 percent to a rate of 844,000, while multi-family permits plummeted by 8.8 percent to a rate of 457,000.

On Monday, the National Association of Home Builders released a separate report showing an unexpected deterioration in homebuilder confidence in June amid sharply elevated lumber prices.

The report said the NAHB/Wells Fargo Housing Market Index dipped to 68 in June from 70 in May. Economists had expected the index to come in unchanged.

"Builders are increasingly concerned that tariffs placed on Canadian lumber and other imported products are hurting housing affordability," said NAHB Chairman Randy Noel.

He added, "Record-high lumber prices have added nearly $9,000 to the price of a new single-family home since January 2017."