Home building activity in the United States fell to a seasonally adjusted 6.5 percent to 1.001 million in May as construction on single and multi-family units decelerated. Building permits also declined 6.4 percent to 991,000 in May, according to the latest figures published by the U.S. Commerce department.
Construction on new single-family homes fell 5.9 percent, while multi-family home building was down 7.6 percent. The only good news was that single-family building permits were up 3.7 percent.
"The encouraging news is that single-family permits are up by almost 4 percent. The modest increase is evidence that builders expect continued release of pent-up demand and a gradual expansion of the housing market. We are still forecasting a 12 percent increase in total housing starts for the year," David Crowe, chief economist of the National Association of Home Builders, said in a statement.
May's figures have been far below what economists had predicted. But then the market has been going against expert predictions this year.
Industry analysts expected building activity to drop by 3.7 percent, but the decline has almost been double. They had earlier predicted that the spring housing market would pick up steam as the cold freeze of the initial months of 2014 melted away. However, the revival is still mapping a bumpy ride as property values rise and demand increases.
"Housing starts have improved modestly over the past few years, but the recovery has been much slower than in previous business cycles," economists at Wells Fargo wrote in a research note for MarketWatch.
Indeed, home affordability is now low across the country as supply of new homes remain tight. But, some indicators show hope for the housing market. The NAHB/Wells Fargo Housing Market Index (HMI) showed that builder confidence was rising and was just a point below the threshold that indicated good building conditions in the country.
"After several months of little fluctuation, a four-point uptick in builder sentiment is a welcome sign and shows some renewed confidence in the industry. However, builders are facing strong headwinds, including the limited availability of labor," NAHB Chairman Kevin Kelly said in a statement.
Crowe explained that consumers are watching the current economic condition and waiting to make a home purchase. Builders are apparently acting accordingly.
The job market has strengthened in the past few months with the U.S. adding back all the jobs it lost in the recession. Once hiring picks up speed and payroll increases economists expect people to start buying homes. They also hope that the housing market will become steady by the end of the year as interest rates remain at record lows, reports The Wall Street Journal.
