New residential construction in the U.S. showed a significant rebound in the month of May, according to a report released by the Commerce Department on Tuesday, although housing starts still came in well below economist estimates.
The report said housing starts climbed 6.8 percent to a seasonally adjusted annual rate of 914,000 in May from the revised April estimate of 856,000. The increase in housing starts came following a 14.8 percent drop in the previous month.
However, economists had been expecting housing starts to surge up to an annual rate of 955,000 compared to the 853,000 originally reported for April.
Chris Low, chief economist at FTN Financial, said, "Starts are weaker than expected after a strong start this year in part because a post-Sandy burst of reconstruction has abated and likely in part because small builders are finding it difficult to access credit thanks to tough regulatory standards on construction loans."
"Given the importance of housing to the Fed, disappointing starts are another reason for the FOMC to keep easing aggressively, though as long as housing is improving the Fed will be happy," he added.
The monthly increase in housing starts was largely due to a rebound by multi-family starts, which surged up by 21.6 percent in May after tumbling by 32.2 percent in April. Single-family starts edged up by just 0.3 percent.
The report also showed a notable increase in new residential construction in the South, where housing starts jumped by 17.8 percent.
Housing starts in the West also rose by 5.7 percent, while housing starts in the Midwest and the Northeast fell by 13.7 percent and 9.0 percent, respectively.
Meanwhile, the Commerce Department also said building permits, an indicator of future housing demand, fell 3.1 percent to an annual rate of 974,000 in May from the revised April rate of 1.005 million. The drop in permits, which followed a 12.9 percent jump in April, came roughly in line with expectations.
The decrease in building permits came as a 10 percent drop in permits for multi-family homes more than offset a 1.3 percent increase in permits for single-family homes.
Compared to the same month a year ago, housing starts were up by 28.6 percent in May, while building permits were up by 20.8 percent.
On Wednesday, the National Association of Home Builders released a separate report showing a much bigger than expected jump in homebuilder confidence in the month of June.
The report said the NAHB/Wells Fargo Housing Market Index soared to 52 in June from 44 in May. Economists had been expecting the index to show a much more modest increase to a reading of 45.
With the much bigger than expected increase, the index climbed above 50 for the first time since April of 2006 and reached its highest level since hitting 54 in March of 2006.
The NAHB noted that any reading above 50 indicates that more builders view sales conditions as good than poor.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.