Real Estate

U.S. construction spending unexpectedly fell in May as higher mortgage rates depressed single-family homebuilding, and recovery is likely to be muted by improving housing supply, Reuters reported. The Commerce Department’s Census Bureau said that construction spending dipped 0.1 percent after an upwardly revised 0.3 percent increase in April. Economists polled by Reuters had forecast construction spending rebounding 0.2 percent after a previously reported 0.1 percent fall in April. Spending on private construction projects slipped 0.3 percent in May after rising 0.4 percent in the prior month. Investment in residential construction dropped 0.2 percent after surging 0.9 percent in April. Outlays on new single-family construction projects decreased 0.7 percent. Spending on multi-family housing was unchanged. Mortgage rates shot up in May, hurting homebuilder confidence, homebuilding and home sales. Housing supply has improved considerably as the higher borrowing costs stifle demand, which could limit growth in new construction. The inventory of previously owned homes in May was the largest since August 2022, while new housing supply was the highest in more than 16 years.