The pace of US housing construction rose more than expected in May after three months of declines, but permits for future projects fell, a government report showed on Tuesday. Economists said the data confirms a gradual slowing of the US housing sector.
The Commerce Department said housing starts rose 5 percent in May to a 1.957 million unit annual pace from an upwardly revised 1.863 million unit rate in April.
However, permits for future groundbreaking, an indicator of builder confidence, fell 2.1 percent to a 1.932 million unit pace in May, the lowest since November 2003 and the first time since January that total housing permits fell below starts.
Compared with a year earlier, May housing starts were down 3.8 percent, with single-family starts down 7.6 percent.
After a five-year rally that sent prices soaring and shattered sales and construction records, the US housing market has shown signs of sustained cooling since mortgage rates began to rise last year.
Economists had expected May housing starts to stabilise at a 1.85 million unit pace, edging above April's initially reported 1.849 million unit rate. Mild weather in January had prompted builders to bring forward some projects, poaching starts from February, March and April.
Construction starts for single-family homes rose 2.1 percent to a 1.586 million unit pace, while groundbreaking on multifamily buildings with five or more units rose 25.4 percent. Starts on structures with two or more units rose 19.7 percent last month. Housing starts rose 15.8 percent in the West, 8.5 percent in the South and 1.7 percent in the Northeast. They fell 15.8 percent in the Midwest.
PERMITS FALL, BELOW STARTS: Economists polled by Reuters had expected housing permits to fall to an annual pace of 1.95 million units in May after an unrevised 1.973 million rate in April.
May permits for single-family homes fell 2.1 percent to a 1.466 million-unit pace, the lowest in nearly three years. Permits for buildings with two or more units also fell 2.1 percent, while permits for buildings with five or more units fell 5.2 percent.
A report by Redbook Research on Tuesday showed that US chain store sales were up 1.9 percent in the three weeks to June 17, with a boost from Father's Day and high school graduation purchases. Sales at major retailers were up 3.3 percent compared with the same week a year ago.
Target, the second-largest US discount chain, said it expected June same-store sales to be at the upper end of its 3 to 5 percent forecast growth range.