Housing starts fell 0.3% at a seasonally adjusted annual rate of 1.16 million, a decline that was lower than expected.
Building permits rose 0.7% at a rate of 1.138 million.
Economists had forecast that starts fell 1.9% month-on-month after a downward-revised 4.9% jump in April, according to Bloomberg.
Building permits were expected to rise at a seasonally adjusted annual rate of 1.145 million.
“The weakness in starts is signalled by the prior drop in permits, which lead starts by a month or two,” said Pantheon Macroeconomics’ Ian Shepherdson.
Permit activity for the prior month was revised higher, while starts were revised down.
The weakness in permits has been mostly in the multi-family segment of the market, while single-family permits have been flat.
Ralph McLaughlin, chief economist at Trulia, noted that the 12-month rolling total of starts — a less volatile measure — rose 11.8% year-on-year in May to 1.15 million. That represents the most starts in a 12-month period since August 2007, and indicates that starts continue to be a bright spot in the housing market amid supply constraints.