U.S. Housing Starts Unexpectedly Skyrocket To 13-Month High In May

(RTTNews) - A report released by the Commerce Department on Tuesday showed new residential construction in the U.S. unexpectedly skyrocketed in the month of May.

The Commerce Department said housing starts soared by 21.7 percent to an annual rate of 1.631 million in May after tumbling by 2.9 percent to a revised rate of 1.340 million in April.

Economists had expected housing starts to edge down to a rate of 1.400 million from the 1.401 million originally reported for the previous month.

With the substantial increase, housing starts spiked to their highest annual rate since hitting 1.803 million in April 2022.

The report showed single-family housing starts shot up by 18.5 percent to a rate of 997,000, while multi-family housing starts skyrocketed by 27.1 percent to 634,000.

The Commerce Department said building permits also surged by 5.2 percent to an annual rate of 1.491 million in May after slumping by 1.4 percent to a revised rate of 1.417 million in April.

Building permits, an indicator of future housing demand, were expected to rise to a rate of 1.423 million from the 1.416 million originally reported for the previous month.

Single-family building permits jumped by 4.8 percent to a rate of 897,000, while multi-family building permits surged by 5.9 percent to a rate of 594,000.

"Our baseline forecast assumes housing starts will dip back below 1.40mn later in the year as the economy enters a recession," said Nancy Vanden Houten, U.S. Lead Economist at Oxford Economics.

"Tighter lending standards are expected to weigh on construction, particularly in the multi-family sector," she added. "However, the May report, along with a rebound in homebuilder sentiment, points to an upside risk to that forecast."

The National Association of Home Builders released a separate report on Monday showing homebuilder confidence in the U.S. has improved by much more than expected in the month of June.

The report said the NAHB/Wells Fargo Housing Market Index jumped to 55 in June from 50 in May. Economists had expected the index to inch up to 51.

The housing market index increased for the sixth straight month, climbing above the midpoint of 50 for the first time since July 2022.