Housing starts for May fell by 6.5 percent to an annual rate of one million units from the 1.07 million units in April, according to the Commerce Department. Economists polled by MarketWatch had estimated a drop to seasonally adjusted annual rate of 1.02 million units.
April's numbers remained unchanged with the Commerce Department sticking to the 1.07 million units from its earlier estimate.
In May, permits for new constructions fell by 6.4 percent to a annualized rate of 991,000, marking the slowest pace in the last four months. Permits for new homes pulled back from the 1.06 million units touched in April. Economists had expected permits to dip to a 1.05-million unit pace.
"Today's data does not provide the kind of assurances that the Federal Reserve would like to see. The housing market, in particular, remains a question mark as it is not able to gain the traction the Fed expected to see by this time in the economic cycle," said Mesirow Financial chief economist Diane Swonk.
Home construction went through a slump because of high mortgage rates and hefty gains in prices that choked demand. Also, the relative shortage of homes pushed prices up. Economists had expected construction and demand to pick up once warmer weather arrived but so far there is little evidence of that revival.