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US housing starts came in at 974,000 last month vs. 1.1 million estimated. Starts for the month prior were revised higher from 891,000 to 934,000 according to data published by the US Census Bureau and the US Department of Housing and Urban Development on Wednesday. Overall, starts rose 4.3% on a monthly basis last month after plunging 26.4% the month before, revised from a decline of 30.2%. Annually, housing starts are down 23%.

Key Takeaways

• US housing starts rose from 934,000 to 974,000 vs. 1.1 million expected last month.
• Starts rose 4.3% on a month-to-month basis in May, and the 30.2% drop in April was revised to a decline of 26.4%.
• Permits, an indicator of future growth, came in at 1.22 million vs. 1.245 million estimated.

Housing starts remained subdued in April as the housing market continues to feel the effects of the coronavirus pandemic. Builders have reported delays in purchasing land for building from March onwards due to the uncertainty facing the national and global economy, and building may also have slowed due to the lockdown restrictions preventing builders from coming to work.

Housing starts and permits bounce, just a lot less than expected. 974k starts vs 1.1mm exp, permits 1.22mm vs 1.245mm exp. pic.twitter.com/e1HzKpNxzr

— George "Grants To State & Local Gov NOW" Pearkes (@pearkes) June 17, 2020

On an annual basis, housing starts are down 23% following the decline in April which was the worst contraction in 5 years. Single-family home starts are down 17.8% annually. Multifamily homes rose from 260,000 to 299,000 in May, while single-family homes remained relatively flat, rising from 674,000 to 675,000. The multi-family home segment includes condos and apartment buildings, and is considered more volatile than the single-family home segment.

Permits came in at 1.22 million vs. 1.245 million expected. Permits for last month were revised downward slightly to 1.06 million. Multi-family home permits rose from 400,000 to 475,000, and single-family permits rose from 666,000 to 745,000.

Expert Outlook

"Privately-owned housing starts in May were at a seasonally adjusted annual rate of 974,000," the press release read. "Privately-owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 1,220,000."

Andrew Grantham, senior economist at CIBC, stated that “In the near-term, pent-up demand from the housing market being largely closed for a couple of months, combined with extremely low interest rates, should make residential investment one of the quicker components of GDP to recover from the COVID-19 shock.”

“However, into 2021 demand for housing units will be slowed by the unemployment rate remaining above levels we were seeing prior to COVID-19, which will encourage more people to live with family or friends rather than establishing their own household,” he added.

Market Reaction

Gold prices remained under selling pressure following the release of the housing starts report. Spot gold last traded at $1,723.41/oz, down 0.09% with a high of $1,730.44/oz and a low of $1,414.30/oz. Prices have ticked downward in tandem with a stock market rally seen earlier today. The rally is likely a natural correction from sharp pullbacks seen in the last two weeks.