The U.S. Commerce Department announced on Tuesday that housing starts fell more than 15% in May to a seasonally adjusted annual rate of 1.18 million units, significantly below economists' forecasts of around 1.43 million units. The sharp decline in construction activity comes as the gold market continues to build on Monday's gains, with spot gold trading near session highs at $4,349.40 an ounce, up nearly 1% on the day. The disappointing housing data, combined with expectations of easing inflation pressures, positions gold to attract safe-haven interest as the U.S. housing sector struggles with sluggish construction activity.
Commerce Department Reports 15.4% Drop in May Housing Starts
The Commerce Department's May housing data revealed construction activity fell to a seasonally adjusted annual rate of 1.18 million units, a decline of more than 15% from the previous month. Economists had forecast relatively stable activity of around 1.43 million units. April's numbers were revised sharply lower to 1.39 million units. Construction activity is down 8.9% compared to May 2025.
Building Permits Fall 0.7% to 1.413 Million Units
Building permits for future homebuilding fell 0.7% to 1.413 million last month, relatively in line with consensus estimates. The number of permits issued in April was revised lower to 1.423 million.
Gold Trades Near Session Highs at $4,349.40 Per Ounce
The gold market is not seeing a major reaction to the disappointing housing data but continues to attract a steady bid as prices trade near session highs. Spot gold last traded at $4,349.40 an ounce, up nearly 1% on the day.
LPL Financial Economist Forecasts GDP Impact from Housing Slowdown
Jeffrey Roach, Chief Economist at LPL Financial, said that he expects the housing market to impact second-quarter GDP growth. "The monthly numbers are volatile, but that said, we normally don't see this drastic of a decline in housing starts," he said. "Given the slowdown in new housing construction, residential investment will likely drag on GDP growth this quarter. In Q1, this category subtracted a quarter point from headline GDP and we could expect something a bit worse for Q2. In sum, we still have a tight housing market."
FAQ
What caused U.S. housing starts to fall 15.4% in May?
The Commerce Department reported housing starts dropped to 1.18 million units in May, significantly below the 1.43 million units economists had forecast. The decline reflects sluggish construction activity in the U.S. housing sector, with April's numbers also revised sharply lower to 1.39 million units.
How did gold prices respond to the May housing data?
Spot gold traded at $4,349.40 an ounce, up nearly 1% on the day, as the market continues to build on Monday's gains. While the gold market did not show a major reaction to the disappointing housing data specifically, it continues to attract steady safe-haven demand as prices trade near session highs.
