Economic Report: U.S. housing starts plunge in May to a two-year low

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The numbers: Construction started on new U.S. homes fell 14.4% in May, the Commerce Department said Thursday. The annual rate of total housing starts fell to 1.55 million last month from a revised 1.81 million in April.

Economists polled by the Wall Street Journal expected housing starts to fall to a 1.68 million rate from April’s initial estimate of 1.72 million.

Permitting for new homes fell 7% to 1.7 million in May from a revised 1.82 in the prior month.

Economists expected building permits to fall to a 1.78 million rate from April’s initial estimate of 1.82 million.

Key details: The construction pace for single-family homes fell 9.2% in May, while apartment starts fell 26.8%.

Permits for single-family homes fell 5.5% in May, while permits in buildings with at least five units fell 10%.

Big picture: The trend in single family starts is downward, said Richard Moody, chief economist at Regions Financial, as higher mortgage interest rates will likely slow demand.  

Market reaction: The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.422%

rose to 3.47% in the wake of the Fed’s aggressive rate hike Wednesday. Stocks
DJIA,
+1.00%

SPX,
+1.46%

were set to open lower.

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