In an unexpected downturn, housing starts as well as permits both fell sharply to their lowest rates since September last year. Housing starts dropped 12.3 percent to a 1.173 million annualized rate in June with permits down 2.2 percent to 1.273 million, both far below Econoday's consensus range.
Starts for both single- and multi-family homes fell sharply, down 9.1 percent for the former to an 858,000 rate and down 19.8 percent for the latter to 315,000. Weakness was most pronounced in the Midwest though all regions show declines.
What good news there is in this report comes from single-family permits which rose 0.8 percent to an 850,000 rate. This, however, does follow a 2.3 percent decline in May. Permits for multi-family units fell 7.6 percent in June to 423,000. Completions were unchanged in the month with a gain for multi-units offsetting an unwelcome decline in single-family homes for a new home market that is starving for supply.
Housing data can be very volatile, evidenced by year-on-year rates which moved from plus 20.3 percent for starts in last month's report to minus 4.2 percent in today's report. Permits moved from plus 8.0 percent to minus 3.0 percent. Volatile or not, this report is a warning that the housing sector, where resales have been dead flat, may not be a positive contributor to the 2018 economy including second-quarter GDP.
A step back for housing starts and a move higher for building permits are the expectations for June, at a 1.320 million annualized rate for starts, compared to 1.350 million in May, and 1.329 million for permits vs May's 1.301 million. Monthly results in this report have been uneven but trends very strong with starts up 20.3 percent year-on-year and permits up 8.0 percent.