Builders pulled back dramatically in May after the housing tax credit ended April 30, producing a 17.2% drop in single-family housing starts, according to data released Wednesday by the U.S. Census Bureau. On an annual basis, that translates into a seasonally adjusted level of 468,000 starts, which is 15.3% higher than the same month one year ago.

Overall starts also declined, falling 10% on a monthly basis to a seasonally adjusted annual pace of 593,000, driven by the drops on the single-family side of the business. However, this does represent a 7.8% increase compared to May 2009.

“The plunge in housing starts in May underlines that a sustained housing rebound has yet to get underway,” said Nigel Gault, chief U.S. economist for IHS Global Insight in Lexington, Mass. “The improvement in starts through April was driven by the extended home buyers' tax credit, which expired April 30. Starts were pulled forward by the credit. Now the credit is gone, it's time for the payback.”

That “payback” emerged in May’s building permit numbers as well. Permits, considered an indicator of future construction and economic activity, slid 5.9% on a monthly basis to a seasonally adjusted level of 574,000 on an overall basis. As expected, single-family permits also dropped compared to the previous month, tumbling 9.9% to 438,000 units.

Compared to the same month one year ago, permits were up in May with increases of 4.4% overall and 3.1% for single-family.

Still, May’s figures leave economists guarded about the pace of housing’s recovery.

“Interest rates and house prices are both low, but credit remains tight and there's still an over-supply of homes on the market. We think that rising employment will lead to a gradual improvement in housing activity over the second half of the year,” Gault said. “But the second successive monthly decline in single-family housing permits in May indicates that the payback has further to run first.”

Alison Rice is senior editor, online, at BUILDER magazine.