By Lucia Mutikani
WASHINGTON (Reuters) - U.S. homebuilding fell for a third straight month in May to the lowest level in eight months as construction activity declined broadly, which could raise concerns that the housing market recovery was faltering.
Housing starts dropped 5.5 percent to a seasonally adjusted annual rate of 1.09 million units, the Commerce Department said on Friday. That was the lowest level since September 2016.
April's sales pace was revised down to 1.16 million units from the previously reported 1.17 million units. Economists polled by Reuters had forecast groundbreaking activity rising to a rate of 1.22 million units last month.
Homebuilding fell 2.4 percent on a year-on-year basis. Weak homebuilding activity suggests housing could weigh on economic growth in the second quarter. Housing has contributed to gross domestic product for two straight quarters.
Prices of U.S. Treasuries rose and U.S. stock index futures pared gains after the data. The dollar fell against a basket of currencies.
Single-family homebuilding, which accounts for the largest share of the residential housing market, decreased 3.9 percent to a pace of 794,000 units last month, also the lowest level in eight months. Single-family home construction has lost momentum since racing to near a 9-1/2-year high in February.
Economists blame the moderation on supply constraints rather than demand for housing, which remains underpinned by a strong labor market. With the unemployment rate at a 16-year low of 4.3 percent, workers' wages are gradually rising.
Mortgage rates have risen but remain low by historical standards.
A survey on Thursday showed a dip in homebuilder confidence in June, with homebuilders expressing frustration over ongoing shortages of skilled labor and building lots.
In May, single-family starts surged 12.5 percent in the Northeast and rose 9.5 percent in the Midwest. But they tumbled 8.9 percent in the South and fell 4.9 percent in the West.
Last month, starts for the volatile multi-family housing segment declined 9.7 percent to a rate of 298,000 units. Multi-family housing starts have now fallen for five straight months.
With rental increases appearing to have leveled off after strong gains in the last few years, there is likely limited room for strong growth in the construction of multi-family homes.
Building permits last month fell 4.9 percent to a pace of 1.17 million units, the lowest level since April 2016. Single-family building permits fell 1.9 percent to a pace of 779,000 units.
The third straight monthly decline in permits left them below the housing starts level, suggesting single-family homebuilding may remain weak in the coming months. Multi-family permits plunged 10.4 percent to a pace of 389,000 units in May.
(Reporting by Lucia Mutikani; Editing by Paul Simao)
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