US housing starts hit 10-year high in May

US housing starts rose more than expected in May, to a 10-year high, according to data released by the Commerce Department on Tuesday.

Housing starts were up 5% from the revised April rate to a seasonally-adjusted annual rate of 1.35m, versus expectations for a smaller gain to 1.30m. The April rate was revised to 1.286m from 1.287m.

Single-family housing starts were up 3.9% from April to a seasonally-adjusted rate of 936,000, while permits for new construction were 4.6% below the revised April rate at a 1.30m, versus expectations for a rate of 1.35m.

Pantheon Macroeconomics economist Ian Shepherdson said: "The consensus for starts looked too low, given the abrupt change from colder/snowier weather than usual in April to much warmer than normal conditions in May. Starts likely won't be sustained at this level, given that permits are weakening.

"The pace of permit issuance is much less sensitive to the weather than starts, and it usually reflects the pace of new home sales, which we think have now peaked for this cycle. In May, most of the total drop in permits was due to an 8.8% fall in the volatile multi-family sector, but the real story is the 2.2% decline in single-family permits, to an eight-month low. We expect further declines over the summer, as higher mortgages rates and tighter lending standards bite."