Total U.S. housing construction starts declined 0.9% in June to a seasonally adjusted annual rate of 1.253 million units, the Commerce Department said Wednesday. Single-family construction rose a solid 3.5%, marking the category’s third improvement in the past four months. But starts in the multifamily segment plunged 9.2% for the month.
A 6.1% drop in total building permits issued during June was the biggest monthly decline since March 2016. Multifamily permits accounted for the entire decline, plummeting 16.8% to a 407,000-unit pace, its slowest since 2016. Permits for single-family residential construction eked out a 0.4% improvement. It was the second consecutive monthly gain for single-family construction permits, hinting at a softening of the key segment’s year-long construction slide.
Economists surveyed by The Wall Street Journal had expected a 0.7% decrease for starts and a 0.3% decrease for permits.
Monthly housing data are notoriously volatile, but the year-to-date numbers are certainly no more encouraging. Total U.S. housing starts for the first half of 2019 are 3.7% below the same period of last year.
Conditions have obviously slowed progress in housing construction. Year-to-date, the total number of new-residential building permits issued has dropped 4.3%, with a whopping 16.1% flop in single-family permits. Multifamily permits are down over the first half of the year, too. The only growth in residential construction permits measured in 2019 is in multifamily permits in the southern region.
The 3.5% improvement in U.S. single-family construction was evident in the West, South and Midwest. But single-family starts year-to-date have dropped substantially in all four regions.
Builders have contended with construction-challenging weather this year. The Wells Fargo Economics Group points out that the National Oceanic and Atmospheric Administration (NOAA) says the first six months of 2019 were the wettest on record over 125 years.
“That noted, we expect a slow and steady improvement in residential construction for the remainder of the year,” says Mark Vitner, senior economist with Wells Fargo. “Starts slowed markedly in the second half of 2018 alongside rising mortgage rates and sluggish new home sales. Mortgage rates have since dipped below 4.0% and should remain relatively low, which should bolster buying conditions further and provide a boost to demand. Released separately today, mortgage purchase applications rose 6.9% year-over-year for the week ending July 12th.
"Builders steadily regaining confidence also points to further improvements in coming months. The NAHB Housing Market Index edged up to 65 during July, with both present and future sales, as well as prospective buyer traffic, gaining one point during the month. Despite remaining below the sky-high levels of last year, the top-line index has improved in six of the past seven months, and gained nine points since last December’s collapse."