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U.S. housing starts dropped by 4.8% to a 708,000 unit pace in May, which was much weaker than the 725,000 expected by consensus and our 720,000 forecast. However, it comes after April starts were upwardly revised to a 744,000 unit pace (was 717,000 units). March starts were also upwardly revised to 706,000 units from 699,000. Only the West saw gains, up 14.4% in May. Single-family starts rose 3.2% over April, the third consecutive monthly gain. In contrast, multi-family starts dropped by 21.3% to 179,00 units, which is the lowest level since December. On a year-over-year basis, multi-family starts are still up 31.6% and single-family starts up 26%. Building permits, a leading indicator for building activity the next few months, surged 7.9% to 780,000 units in May, after April was also revised up to a 723,000 unit pace (was 715,000). While the headline news was initially jarring, the sharp upward revisions offset the news, to likely add some support to stock prices and Treasury yields today.