- U.S. housing starts declined by 0.9% to 1.253 million units (annualized) in June from a downwardly revised 1.265 million units in April. The market expected a slightly smaller decline of 0.7%.
- The decline was concentrated in the volatile multi-family segment, which fell by 9.2% to 406k, breaking a four-month streak of increases. The larger single-family segment posted a gain of 3.5% to 847k.
- Permits retreated 6.1% in June to 1.22 million. Multi-family permits plunged by 16.8%, following a more modest 3.0% decline in the previous month, while single-family permits were up marginally by 0.4%.
- On a regional basis, the results were evenly split with starts down in the South (-9.2%) and West (-4.9%), but up in the Northeast (+31.3%) and the Midwest (+27.1%).
Key Implications
- U.S. housing starts continue to move sideways. While down over the past two months, they are up ever so slightly for the second quarter as a whole. Still, the pullback in building permits in June suggests further weakness could be in the pipeline.
- Rising costs, lack of land and labor shortages continue to pose challenges to builders, impeding their ability to fully take advantage lower borrowing rates to construct more in demand entry-level units. Consequently, the housing market continues to face tight inventories and soft sales.
- On the demand side, affordability should remain favorable relative to the past few years, as interest rates stay low and wage growth accelerates.
