Housing Starts Take Another Hit
Housing starts–one of the most volatile metrics over the past several years–took another hit in June, falling by more than 12 percent from May, HUD and the Census Bureau reported yesterday.
The report said privately owned housing starts in June came in a seasonally adjusted annual rate of 1.173 million, 12.3 lower than May’s revised 1.337 million and 4.2 percent lower than a year ago (1.225 million). Single-family housing starts came in at 858,000; 9.1 percent lower than May’s revised 944,000. The June rate for units in buildings with five units or more fell to 304,000, down by 20.2 percent from 381,000 in May and down by 15.3 percent from a year ago.
All for U.S. regions took a hit on starts. In the South, starts fell by 9.1 percent in June, seasonally adjusted, to 601,000 units from 661,000 units in May but improved by 13.4 percent from a year ago. In the West, sales fell by 3 percent in June to 320,000 units from 330,000 units in May and fell by 3.3 percent from a year ago.
In the Midwest, starts fell by nearly 36 percent in June to 156,000 units from 243,000 in May and fell by 23.5 percent from a year ago. In the Northeast, starts fell by nearly 7 percent in June to 96,000 units from 103,000 units in May and fell by 40 percent from a year ago.
Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said the below-expectations results came in on the heels of a cycle high of 1.337 million in May.
“Even after accounting for the unusual volatility in the Midwest, overall starts were still extremely weak and suggest that the housing sector has lost momentum,” Vitner said. “The recent weakness in housing starts is perplexing, given continued tight supply of homes available for sale and fairly high levels of builder confidence.”
Mark Fleming, chief economist with First American Financial Corp., Santa Ana, Calif., said limited supply of homes for sale remains the biggest issue facing the housing market. But he said the starts results present a “mixed message” for the housing market.
“While housing starts decreased on an annual basis, completions are up–indicating some immediate relief in alleviating the supply shortage,” Fleming said. “As builders start work on additional housing, we will inch closer to balancing inventory with demand. But, with millennials entering household formation age and baby boomers living longer and more independently than previous generations, builders will remain under pressure to keep up with the growing demand.”
The report said privately owned housing units authorized by building permits in June came in at a seasonally adjusted annual rate of 1.273 million, 2.2 percent below the revised May rate of 1.301 million and 3 percent below a year ago (1.312 million). Single-family authorizations in June rose to 850,000; 0.8 percent higher than the revised May figure of 843,000. Authorizations of units in buildings with five units or more fell to 387,000 in June, down by 8.7 percent from 424,000 in May and down by 16.2 percent from a year ago.
The report said privately owned housing completions in June were unchanged at 1.261 million in June and 2.2 percent higher than a year ago (1.234 million). Single-family housing completions in June fell to 862,000; 2.3 percent below the revised May rate of 882,000. The June rate for units in buildings with five units or more was 393,000, up by 7.1 percent from 367,000 in May but down by 2.7 percent from a year ago.
“As disappointing as June’s housing starts are, they do not suggest the housing recovery has shorted out,” Vitner said. “Builders remain fairly optimistic and buyer traffic is reported to be fairly solid. Stronger job and income growth should push home buying higher in coming months.”
