Builders in the U.S. broke ground on fewer homes than forecast in May as a slump in the construction of apartments swamped a pickup in single-family houses.
Starts dropped 4.8 percent to a 708,000 annual pace from a revised 744,000 rate in the prior month that was the highest since October 2008, the Commerce Department reported today in Washington. The median forecast of 77 economists surveyed by Bloomberg News called for a 722,000 pace.
Building permits, a proxy for future construction, climbed to the highest level since September 2008, showing the combination of lower prices and record-low mortgage rates is underpinning demand and encouraging new projects. At the same time, competition from cheaper previously owned properties and stricter lending standards remain hurdles for an industry thatâ€™s been the weakest link for the economic expansion.
â€œWe saw a very strong number in new permits, indicating builders are seeing improving demand,â€ said Russell Price, senior economist at Ameriprise Financial Inc. in Detroit. The report â€œwas a lot better than the headline number would suggest.â€
Housing starts, unadjusted for seasonal variations, were up 26 percent in the 12 months ended in May.
Building permits increased 7.9 percent to a 780,000 annual rate, reflecting gains in single-family and multifamily homes.
Stock-index futures held gains after the figures, with the contract on the Standard & Poorâ€™s 500 Index expiring in September rising 0.2 percent to 1,344 at 8:51 a.m. in New York. The yield on the benchmark 10-year Treasury note climbed to 1.58 percent from 1.57 percent late yesterday.
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