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U.S. homebuilding surged to near an 11-year high in May amid an acceleration in both single-family and multi-family home construction, but a second straight monthly drop in permits suggested housing market activity will remain moderate.
Housing starts jumped 5.0 percent to a seasonally adjusted annual rate of 1.350 million units last month, the Commerce Department said on Tuesday. That was the highest level since July 2007. Data for April was revised slightly to show starts falling to a rate of 1.286 million units instead of the previously reported pace of 1.287 million units.
Building permits fell 4.6 percent to a rate of 1.301 million units, the lowest level since September 2017. Economists polled by Reuters had forecast housing starts rising to a pace of 1.310 million units last month and permits declining to a rate of 1.350 million units.
Single-family homebuilding, which accounts for the largest share of the housing market, increased 3.9 percent to a rate of 936,000 units last month.
Single-family home construction rose in the Northeast and Midwest, but fell in the South and West. Single-family homebuilding has lost momentum since hitting a pace of 948,000 units last November, which was the strongest in more than 10 years.
Permits to build single-family homes fell 2.2 percent in May to a pace of 844,000 units, also the lowest level since September 2017. With permits lagging starts, single-family homebuilding could slow in the months ahead.
A survey on Monday showed confidence among single-family homebuilders dipped in June, with builders “increasingly concerned that tariffs placed on Canadian lumber and other imported products are hurting housing affordability.” According to the survey, the expensive lumber had “added nearly $9,000 to the price of a new single-family home since January 2017.”
The Trump administration in April 2017 imposed anti-subsidy duties on imports of Canadian softwood lumber. More expensive lumber together with a lack of land and labor have worsened an acute shortage of homes for sale, hobbling the housing market.
Residential investment contracted in the first quarter. The housing market continues to lag overall economic growth, which appears to be accelerating in the second quarter after hitting a speed bump at the start of the year.
Starts for the volatile multi-family housing segment rebounded 7.5 percent to a rate of 414,000 units in May. Permits for the construction of multi-family homes fell 8.8 percent to a pace of 457,000 units.