Drop in U.S. Housing Starts Shows Industry May Weigh on Growth

Three straight months of declines in new-home construction show U.S. homebuilding may weigh on second-quarter growth, Commerce Department data showed Friday.

Highlights from Housing Starts (May)

• Residential starts decreased 5.5% to a 1.09m annualized rate (est. 1.22m), the weakest since September

• Starts in April were revised down to 1.16m, while March figures were also weaker than last reported

• Permits, a proxy for future construction, fell 4.9% to a

1.17m rate, the lowest since April 2016

Key Takeaways

May starts were pushed lower by declining construction in South, which reached the weakest level since October 2015, and in the Midwest. Construction of single-family properties dropped 3.9 percent to the lowest since September, while ground-breaking on multifamily units declined for a fifth straight month.

Shortages of skilled workers and available lots have weighed on the industry even as Americans remain upbeat about home-buying. Builders have become a bit less buoyant than earlier in the Trump administration, when they registered the highest optimism since 2005, data earlier this week from the National Association of Home Builders and Wells Fargo showed.

Economist Views

“Homebuilders continue to caution that construction may be limited by a lack of available lots or skilled labor, but the market fundamentals suggest that demand should remain solid,” Tom Simons, an economist at Jefferies LLC in New York, said in a note before the data release.

Other Details

• Report shows a wide margin for error, with a 90 percent chance that last month’s figure fell between a 17.4 percent drop to a 6.4 percent advance

• Construction of single-family houses fell to a 794,000 rate from 826,000 in April

• Groundbreaking on multifamily homes, such as apartment buildings, dropped 9.7 percent to an annual rate of 298,000

Bloomberg

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell