Homebuilders slowed down the pace of construction for the third straight month in May, a possible sign that the shortage of houses for sale might worsen.
The Commerce Department said June 16 that housing starts fell 5.5 percent in May to a seasonally adjusted annual rate of 1.09 million units. This comes after a 2.7 percent monthly decline in April and a 7.7 percent drop in March. Home construction is still 3.2 percent higher year-to-date, but that increase has been too modest to address the dwindling supply of homes.
Homebuilders remain optimistic about their sales prospects, but the level of construction has done little to meet demand from would-be buyers. The number of existing homes listed for sale has been registering annual declines for roughly two years — creating a dearth of properties on the market.
“The lack of inventory of homes for sale is one of the most pressing challenges in the housing market today,” said Mark Fleming, chief economist at First American Financial, a title insurance company.
The monthly declines in housing starts come despite a solid job market with a relatively healthy unemployment rate of 4.3 percent. Many analysts expect the job gains to translate into more home construction. What has generally happened is a decline in the construction of apartment buildings that has been more than offset by the gains in the building of single-family houses.
Groundbreakings in the Northeast were unchanged in May and declined in the Midwest and South. Housing starts rose slightly in the West.
Building permits, an indicator of upcoming construction, tumbled 4.9 percent nationwide to 1.17 million.
U.S. homebuilders have stayed confident. The National Association of Home Builders/Wells Fargo builder sentiment index registered at 67 in June, a slight decline from May. Readings above 50 indicate more builders view sales conditions as positive. The index has been above 60 since September.
Homebuilding has recovered from the housing bust that tore through the U.S. economy a decade ago. While the rate of construction is generally improving, it still lags the 1.4-1.5 million annual rate that was common in the 1980s and 1990s.