Housing starts in US decline to lowest level since September

NEW US home construction fell in June to the lowest since September after plunging the prior month, driven by a slide in single-family homebuilding that underscores waning demand.

Residential starts declined 2 per cent last month to a 1.56 million annualised rate, after an upwardly revised 1.59 million pace in May, according to government data released on Tuesday (Jul19). The median forecast called for a 1.58 million pace.

Applications to build, a proxy for future construction, eased to an annualised 1.69 million units, also the fewest since September.

Starts and permits of single-family homes slid to two-year lows, adding to an increasingly downbeat picture for the housing market. A sharp rise in mortgage rates, spurred by aggressive actions by the Federal Reserve to curb inflation, has crushed affordability and curbed demand. As a result, inventory has increased, housing deals are falling through and some sellers are now cutting prices. 

A report Monday showed homebuilder sentiment plunged in July, falling by the most since the start of the pandemic. On top of demand concerns, builders are also contending with ongoing production bottlenecks, labour-supply challenges and high costs. 

Builder shares have suffered more than the broader market this year. An S&P supercomposite index of homebuilders has slumped more than 30 per cent this year compared with a roughly 20 per cent drop in the S&P 500.

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The government’s report showed single-family housing starts fell 8.1 per cent to an annualised 982,000 rate. Meanwhile, construction of multifamily dwellings increased more then 10 per cent. 

The number of one-family homes authorized for construction but not yet started eased to the lowest level this year.

Existing-home sales for June will be released on Wednesday, followed by new-home purchase data next week. BLOOMBERG