U.S. housing starts dropped precipitously in June, falling 12.3% m/m to 1.173 million units (annualized). This was the largest decline since November 2011 and much bigger than the consensus forecast for a 2.2% pullback.
The outturn for starts reflected declines in both the single and multifamily segments. Single family starts declined 9.1% (to 858k), while multi-family starts posted an even larger decline of 19.8% (to 315k), bringing it to its lowest level since August last year.
Building permits also pulled back, but by a smaller 2.2%, largely reflecting declines in multifamily permits (-7.6%) as single permits posted a moderate increase (0.8%).
Regionally, the downturn in starts was evident in all areas, with the Midwest the most pronounced – down 35.8% m/m and reversing a large portion of the gain (51.9%) posted last month. This was followed by declines in the South (-9.1%), the Northeast (-6.8%) and the West (-3%).
Key Implications
Housing starts are volatile on a monthly basis, but the size of the pullback in May is concerning. The details of the report did not offer much in the way of bright spots, as the decline took place across regions and segments.
The housing industry is facing headwinds on both the demand side – higher interest rates and rising prices – and the supply side – labor shortages and tariffs driving up material costs. One month does not a trend make, but this will remain an indicator to watch for signs that it is becoming entrenched.
