WASHINGTON – The pace of U.S. home construction slipped in May with many Americans still struggling to afford new houses.
Builders started work last month on a seasonally adjusted annual rate of 1.01 million homes, the Commerce Department said Tuesday. That was down 6.5 percent from 1.07 million in April. It marked the first decline in four months and was bigger than the 3.7 percent drop forecast by economists.
Builders began work on fewer single-family houses, condominiums and apartments last month.
Home construction has struggled to gain much traction this year, limiting its ability to contribute as much to economic growth as in the past. Many would-be buyers face higher mortgage rates than at this time last year, while builders are selling fewer new homes but charging more for them. That has reduced the number of possible buyers and the number of construction jobs.
Builders employ 1.49 million fewer workers than at the start of the recession in December 2007, a loss of roughly 20 percent.
We expect housing to contribute positively to 2014 economic growth, but the magnitude of its contribution likely will be much smaller than that reported for the past two years, said Dana Saporta, director of U.S. economics at the bank Credit Suisse.
In May, construction tailed off in the Northeast, Midwest and West. Only the South experienced greater building activity in May.
Housing starts are up 9.4 percent over the past 12 months, but apartments account for most of the gains, suggesting more Americans will be renting instead of owning.
Since the housing bust and recession, Americans have had to deal with relatively flat wages and job insecurity, both obstacles to saving for a down payment. The home ownership rate was 64.8 percent at the start of the year, down from a peak of 69.2 percent during 2004.
The National Association of Home Builders/Wells Fargo builder sentiment index rose to 49 in June, up from 45 in May. A reading below 50 indicates that builders consider the conditions for new construction to be poor. The index had been above 50 from June through January.