The Commerce Department released a report on Tuesday showing another steep drop in new residential construction in the United States in the month of May.
The report said housing starts plunged by 15.4% to an annual rate of 1.177 million in May after tumbling by 8.5% to a revised rate of 1.392 million in April.
Economists had expected housing starts to slump by 2.4% to an annual rate of 1.430 million from the 1.465 million originally reported for the previous month.
The bigger than expected drop in housing starts largely reflected a nosedive by multi-family starts, which plummeted by 40.2% to an annual rate of 295,000. Single-family starts also tumbled by 1.9% to an annual rate of 882,000.
"Just as the pace of housing starts in March and April overstated the strength in housing activity, the plunge in May overstates any weakness," said Nancy Vanden Houten, Lead US Economist at Oxford Economics.
"Looking ahead, we expect starts to move sideways until later in the year when we expect lower mortgage rates in response to easing inflation and Fed rate cuts to spur both home sales and starts," she added.
The Commerce Department said building permits also slid by 0.7% to an annual rate of 1.413 million in May after surging by 4.4% to a revised rate of 1.432 million in April.
Building permits, an indicator of future housing demand, were expected to tumble by 1.5% to an annual rate of 1.420 million from the 1.442 million originally reported for the previous month.
Multi-family permits plunged by 2.8% to an annual rate of 527,000, while single-family permits rose by 0.6% to an annual rate of 886,000.
On Monday, the National Association of Home Builders released a separate report showing a modest deterioration in homebuilder confidence in the month of June.
The report said the NAHB/Wells Fargo Housing Market Index dipped to 35 in June after jumping to 37 in May. Economists had expected the index to edge down to 36.
The NAHB noted the index remained below 40 for the 14th straight month, a streak not seen since 2011-2012 during the foreclosure crisis.
