Housing starts weaker than expected

Housing starts were weaker than expected in June falling 5.0% to 549,000. Single-family starts slipped 0.7% in June, while the volatile multi-family starts series dropped 21.5%. Building permits were stronger than expected, rising 2.1% to 586,000 in June.

A mixed report that is probably not as weak as suggested by the larger-than-expected decline in overall housing starts. The decline in starts in June was largely due to a sharp fall in multi-family starts (inherently a more volatile series due its lumpiness), while building permits rose (although again this was due to multi-family activity). The housing completions data provide some support for the view that there may have been some diversion away from starting new units in an attempt to finish units that were under contract before the June 30 deadline to be eligible for the tax credit (subsequently extended to September). Housing completions rose 26.2% in June, which was a record percentage increase for the history of the series. Our best guess is that housing construction activity continues to bottom out at low levels and that we will see some very modest growth in the second half of the year in new housing construction.


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