US single-family housing starts slide to eight-month low; imported inflation increases sharply

WASHINGTON, June 16 (Reuters) - U.S. single-family homebuilding fell to an eight-month low in May, pressured by higher mortgage rates and building material prices, suggesting the housing market could remain a drag on economic growth in the second quarter.

The decline combined with a plunge in multi-family housing starts to push down overall homebuilding to a six-year low last month, the report from the Commerce Department ‌on Tuesday showed. Labor and building lots are also scarce, making it difficult for builders to respond to a housing shortage that has created an affordability crisis.

Residential investment, which includes homebuilding, has contracted for five straight ‌quarters. A National Association of Home Builders survey on Monday showed home builder sentiment deteriorated in June.

"There is little indication that U.S. home building will break to the upside anytime soon, given high mortgage rates, previous over-building in the South, elevated new home inventories relative to sales, and the ​current depressed level of builder activity in the NAHB survey," said Sal Guatieri, a senior economist at BMO Capital Markets.

Single-family housing starts, which account for the bulk of homebuilding, fell 1.9% to a seasonally adjusted annual rate of 882,000 units, the Commerce Department's Census Bureau said. That level was the lowest since last September.

Single-family homebuilding declined in the South and West regions, but increased in the Northeast and Midwest. It decreased 6.7% on a year-over-year basis in May.

Mortgage rates have risen as the U.S.-backed war with Iran drove up oil prices, boosting inflation and Treasury yields. The rate on the popular 30-year fixed-mortgage has increased more than 50 basis points since the conflict started in late February, data from mortgage finance agency Freddie Mac showed.

Washington and Tehran on ‌Sunday said they had agreed terms to end the war and reopen the ⁠Strait of Hormuz. Prior to the war, the housing market was under pressure from import tariffs, which raised the prices of building materials and appliances.