New home construction falls in May
Government says the number of single family home starts slipped to a 17-year low.
NEW YORK (CNNMoney.com) -- Initial construction of U.S. homes was slightly lower than expected in May, with the number of single family homes hitting a 17-year low, according to a government report released Friday.
Privately owned housing starts fell 3.3% to a seasonally adjusted annual rate of 975,000 in May from April's revised 1,008,000, according to the Commerce Department.
Economists were expecting housing starts to decline to 980,000 from the originally reported 1,032,000, according to a consensus estimate of economists compiled by Briefing.com.
Michael Larson, real estate analyst at Weiss Research, said Tuesday's report shows "a market that's stuck in the doldrums."
Larson thinks the largest percentage declines in housing starts are "probably behind us." But he thinks the number of new homes under construction will remain at current levels until builders reduce "their inventory overhang."
The housing market has been stuck with a record number of homes for sale in recent months after a construction boom went bust last summer.
At the same time, demand from home buyers has been weak as the economy has faltered and mortgage lending standards have tightened.
Tuesday's report comes one day after the National Association of Home Builders reported that its measure of homebuilders' confidence matched a record low in June.
The NAHB/Wells Fargo housing market index for June fell 1 point to a seasonally adjusted reading of 18, down from May's reading of 19. A reading below 50 indicates that more builders think home sales conditions are poor than those who think the environment is positive for sales.
Single-family housing starts, considered the core of the real estate market, slipped 1% in May to a rate of 674,000, the lowest annual rate since April 1991.
Applications for building permits fell 1.3% to a seasonally adjusted annual rate of 969,000 last month from a revised 982,000 in April. Economists were expecting 950,000 applications in the month.
Housing starts in the Northeast jumped 61.5% in May and fell 25% in the Midwest. But the regional numbers can vary widely based on weather conditions and a variety of other unpredictable factors.