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U.S. housing starts decreased 3.3% in May, the U.S. Commerce Department announced Tuesday, as builders attempted to reduce supply amid the nation's worst housing slump in a generation. Housing starts totaled a 969,000 annual rate in May, the Commerce Department said. It was the lowest housing start pace in 17 years.
Economists surveyed by Bloomberg News had expected housing starts to total a 985,000 annualized rate in May.
Further, housing starts are down 32.1% in the past year and single-family home starts are down 41.2%. Over the past four months, housing starts have averaged a 1.02 million annual pace.
Meanwhile, building permits, a measure of future construction, decreased 1.3% to a 969,000 annualized rate in May. Single-family permits decreased 4%. Building permits have declined 36.3% in the past year.
Economist Glen Langan told BloggingStocks Tuesday many potential homebuyers are remaining in wait-and-see mode, as the housing slump persists.
"When you think about it, if one didn't have to move, say, for job reasons, why would you? New buyers and existing home owners are taking it one month at a time. If prices drop, they wait another month. As you know, many have been waiting several months, given price trends in various regions of the country," Langan said. "Prices are still arcing downward and the housing start totals reflect that. That means it makes sense to wait if you're in the market to buy, but it's the worst of all markets if you have to sell."
Langan said it's difficult to predict when home starts will rebound, given uncertainties in the U.S. economy. "Typically, the prospect of a Fed rate increase would push some potential new home buyers into the market, fearing higher mortgage rates in the quarters ahead. But concern about a possibly worsening U.S. economy will keep many of these buyers on the fence," Langan said.
By U.S. region, in May housing starts fell 25% in the Midwest, 10.3% in the West, and 4.4% in the South. Housing starts surged 61.5% in the East.
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