Starts varied widely from region to region, however, with the Northeast experiencing a sharp drop in the rate of total starts and the Midwest seeing a marked increase.

The Commerce Department reported ground-breaking for homes fell 0.4% in May to a seasonally adjusted annual rate of 1.622 million units. The decline comes after a revised 2.3% increase in April. Economists had been expecting an annual rate of 1.595 million in overall starts.

Housing starts fell by 28.3% in the Northeast in May to a seasonally adjusted annual rate of 132,000 units, down from a seasonally adjusted annual rate of 184,000 units in April.

In the Midwest, starts jumped 15.8% in May to a seasonally adjusted annual rate of 344,000 units, up from a seasonally adjusted annual rate of 297,000 units.

In a positive sign, the pace of new housing permits, a gauge of sentiment among builders about the economy in months ahead, climbed 2.1% in May to a seasonally adjusted rate of 1.621 million after posting a 2.5% decline in April. Elsewhere in the country, starts fell in the South by 1.9% but climbed by 2.9% in the West.

May's decline in housing starts can be partly attributed to a moderate 0.2% decline in single-family homes. Multifamily units rose by 0.7%.