Surprising Housing Starts Reflecting Headwinds

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Surprising Housing Starts Reflecting Headwinds

Jul 25, 2023 | News | 0 comments

In June, there was a decrease in U.S. single-family homebuilding. However, permits for future construction increased to a 12-month high due to the sluggish existing home sales market. The drop in housing starts followed a significant 18.7% surge in May, which had pushed the number of starts for single-family projects to an 11-month high.

According to the U.S. Census Bureau, housing starts in June were at a seasonally adjusted annual rate of 1.43 million, which fell below economists’ predictions of 1.48 million. This figure represented an 8.1% decline from the same period a year ago.

Bright MLS Chief Economist Lisa Sturtevant pointed out that in June, there were merely 600,000 existing homes listed for sale across the U.S.

As for single‐family housing starts in June, they were reported at a rate of 935,000, which was 7% lower than the revised May figure of 1,005,000. Additionally, the rate for units in buildings with five units or more was 482,000 for the same month.

The indicators for future completions, represented by issued permits, experienced an overall 3.7% decrease from May, and a significant 15.3% drop from the previous year. However, there was a positive trend in single-family permits, which increased by 2.2%. On the other hand, the more volatile multifamily permits declined by 12.8%.

When analyzing the regional data for June permits, the Midwest saw an increase of 5.9%. However, there were declines in the South (-2.6%), West (-4.0%), and Northeast (-23.4%).

Completed homes fell 3.3% from the prior month but were 5.5% above May 2022. Single-family homes under construction remain high, while multifamily units under construction set a record despite a slowing pace.

Homebuilder sentiment for single-family sales in the next six months dropped in June, amid the critical need for increased new home inventory. Existing homeowners are reluctant to move due to their low mortgage rates, noted Zillow’s senior economist Nicole Bachaud.

High mortgage rates may threaten builders’ ability to increase housing supply. Additionally, reduced affordability, supply-side challenges, and stricter lending standards could hamper builder momentum, as per Kushi.