U.S. housing starts dip, permits maintain gains

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[June 17, 2016]  WASHINGTON - U.S. housing starts slipped in May as the construction of multi-family housing units dropped, but further gains in building permits suggested a rebound that would continue to support economic growth in the second quarter.

Groundbreaking fell 0.3 percent to a seasonally adjusted annual pace of 1.16 million units, the Commerce Department said on Friday. Starts in April were little changed at a 1.17 million-unit pace.

Economists polled by Reuters had forecast housing starts falling to a 1.15 million-unit pace last month.

Housing remains a pillar of strength for the economy.

Residential construction added almost a six-tenths of a percentage point to first-quarter gross domestic product, the biggest contribution in more than three years.

Groundbreaking on single-family homes, the largest segment of the market, rose 0.3 percent to a 764,000-unit pace last month. Single-family starts in the South, where most home building takes place, rose 2.6 percent to their highest level since December 2007.

Single-family starts in the Northeast surged 12.7 percent.

In the West, groundbreaking on single-family housing projects rose 1.9 percent. But single-family starts in the Midwest tumbled 14.7 percent to a six-month low.

Further gains in single-family starts are likely after a survey on Thursday showed confidence among home builders rose to a five-month high in June amid optimism over sales and buyer traffic. But single-family home construction continues to run ahead of permits, which could limit gains in the near term.

Housing starts for the volatile multi-family segment fell 1.2 percent to a 400,000-unit pace. The drop followed an 11.9 percent jump in April. The multi-family segment of the market continues to be supported by strong demand for rental accommodation as some Americans remain wary of homeownership in the aftermath of the housing market collapse.

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Workers install a roof on a multi-family building against the backdrop of the Rocky Mountains in Broomfield, Colorado February 19, 2014. REUTERS/Rick Wilking

Multi-family home construction is also being aided by rising household formation as a fairly strong labor market increases employment opportunities for young adults.

Building permits rose 0.7 percent to a 1.14 million-unit rate last month. Permits for the construction of single-family homes fell 2.0 percent last month to a 726,000-unit rate, while multi-family building permits increased 5.9 percent to a 412,000-unit pace.

((Reporting by Lucia Mutikani; Editing by Paul Simao))

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