Housing Starts: Sharp Decline

Bottom Line: While the volatile multifamily sector reversed May's strong gains and fell sharply in June, the single-family sector slumped more than expected in June, contributing to a substantial miss of expectations. Still, the trend in single-family starts is modestly higher with the pace of gains in the last three months running faster than that of the last six and 12 months. The trend in multifamily, though, is sideways to lower. Finally, building permits declined by 2.2% and, while volatile, suggest weakness in coming months. Single-family permits rose slightly while multi-family permits fell moderately, suggesting current trends will continue. Housing Starts FELL by 12.3% in June to 1173k, compared with market expectations for a decline to 1320k. Meanwhile, the prior month was revised slightly lower from 1,350k to 1,337k. Housing starts have been slowly climbing, albeit amid substantial volatility, since reaching their cyclical nadir in April 2009 and are now 4.2% BELOW their year ago level. However, they are still a sharp 48.4% BELOW their January 2006 peak. Single Family Housing Starts FELL by 9.1% to 858k. Single family housing starts are 0.2% BELOW their year ago level but still 52.9% BELOW their January 2006 peak. Multifamily Housing Starts FELL by 19.8% to 315k. Multifamily starts are now 13.7% BELOW their year ago level.