However, single-family permits, which can be an indicator of future building activity, rose 3.7%.
"The dip in single-family production shows builders continue to move carefully in adding inventory," said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Del. "They are also facing supply chain issues, such as access to lots and labor."
Nationally, single-family housing starts were down 5.9% to a seasonally adjusted annual rate of 625,000 units in May. Meanwhile, multifamily production fell 7.6% to a seasonally adjusted annual rate of 376,000 units.
"The encouraging news is that single-family permits are up by almost 4%," said NAHB chief economist David Crowe. "The modest increase is evidence that builders expect continued release of pent-up demand and a gradual expansion of the housing market. We are still forecasting a 12% increase in total housing starts for the year."
Regionally in May, combined single- and multifamily housing production fell the most in the Northeast, the Midwest and the West, with respective losses of 25.2%, 16.5% and 16.3%. Meanwhile, the South posted a 7.3% gain.
Issuance of building permits registered a 6.4% decline to a seasonally adjusted annual rate of 991,000 units in May. This was due entirely to a decrease in the multifamily sector, where permits registered a 19.5% loss to 372,000 units. Single-family permits increased to 619,000 units.
The Northeast and Midwest registered overall permit gains of 3.5% and 3.8%, respectively, while the South and West posted respective losses of 7.3% and 15.2%.