BT : US housing starts drop to five-month low in May

Business Times - 17 Jun 2010

LATEST US DATA
US housing starts drop to five-month low in May

(WASHINGTON) US housing starts fell more than expected last month to their lowest level in five months, a government report showed yesterday, as a popular homebuyer tax credit that had buoyed construction activity over the past two months expired.

The Commerce Department said that housing starts dropped 10 per cent to a seasonally adjusted annual rate of 593,000 units, the lowest level since December. The percentage decline was the biggest in 14 months. April's housing starts were revised down to show a 3.9 per cent increase, which was previously reported as a 5.8 per cent rise.

Analysts polled by Reuters had expected housing starts to fall to 650,000 units. Compared to May last year, starts were up 7.8 per cent.

New building permits, which give a sense of future home construction, dropped 5.9 per cent to a 574,000-unit pace last month, the lowest in a year. That followed a 10.9 per cent drop in April and compared to analysts' forecasts for a rise to 630,000 units.

Housing starts rose in March and April as new home construction was pushed forward to take advantage of a government tax credit for home buyers. Buyers had to sign contracts by April 30 to qualify for the tax credit.

In the wake of the end of the tax credit, home builder sentiment fell sharply this month. Analysts, however, believe the pullback in housing will be temporary, citing the gradual improvement in the economy. Demand for loans to buy homes rebounded from 13-year lows last week.

Groundbreaking for single-family homes tumbled 17.2 per cent to an annual rate of 468,000 units last month after a 5.6 per cent increase in April. The percentage decline last month was the largest since January 1991 and snapped four months of gains.

However, starts for the volatile multi-family segment surged 33 per cent to a 125,000-unit annual pace. Home completions fell 7.4 per cent to a 687,000-unit pace.

The inventory of total houses under construction fell 2.3 per cent to a record low 475,000 units last month, while the total number of units authorised, but not yet started dropped 4 per cent to 91,200 units, the lowest since November.

Meanwhile, wholesale prices in the US fell last month for the third time in the past four months, pulled down by lower costs for energy and food as European default concerns threatened to slow the global expansion.

The 0.3 per cent decline in prices paid to factories, farmers and other producers was smaller than projected by the median forecast of economists surveyed by Bloomberg News and followed a 0.1 per cent drop in April, figures from the Labor Department showed yesterday in Washington.

Excluding food and fuel, so-called core prices climbed 0.2 per cent for a second month.

Prices excluding food and fuel were projected to rise 0.1 per cent. About 40 per cent of the increase in core prices last month was due to a 0.8 per cent jump in the cost of light trucks, the Labor Department said. Cigarette and civilian aircraft prices also climbed. - Reuters, Bloomberg

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