Reuters

(Reuters)

Housing Starts Pause After Gains, Permits Soar

Politics Reuters

U.S. housing starts fell in May after a hefty increase the prior month, but a surge in permits for future construction to a near eight-year high suggested the pullback was temporary and pointed to underlying strength in housing.

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Groundbreaking dropped 11.1 percent to a seasonally adjusted annual pace of 1.04 mullion units, the Commerce Department said on Tuesday. That partially reversed April's large gain. April starts were revised up to a 1.17 million-unit rate, the highest since November 2007.

Economists polled by Reuters had forecast housing starts falling to a 1.10 million-unit pace last month after a previously reported 1.14 million-unit rate.

Permits for future home construction increased 11.8 percent to a 1.28 million-unit rate, the highest since August 2007. Permits have been above a 1 million-unit pace since July.

Home building has regained ground lost during a harsh winter and there are signs activity will accelerate this year as tightening labor market conditions spur strong wage gains and encourage young adults to move from their parents' basements.

A survey on Monday showed confidence among builders vaulting to a nine-month high in June, with measures of current sales and buyer traffic increasing solidly.

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Economists anticipate that the housing market strength will take up some of the slack of the struggling manufacturing sector and support economic growth this year.

Groundbreaking for single-family homes, which account for the largest share of the market, fell 5.4 percent to a 680,000 unit pace. Starts for the volatile multifamily segment tumbled 20.2 percent to a 356,000 unit rate.

Groundbreaking fell in all four regions, declining a steep 26.5 percent in the Northeast after April's spectacular gains. Starts in the South, where most of the home building takes place, fell 5.0 percent.

Single-family building permits increased 2.6 percent to their highest level since December. Multi-family building permits soared 24.9 percent.

Permits for buildings with five units or more increased to their highest level since January 1990. (Reporting By Lucia Mutikani; Editing by Andrea Ricci)