The numbers: Construction started on new U.S. homes fell a seasonally adjusted 2% in June to 1.56 million, the Commerce Department said Tuesday. The annual rate of total housing starts fell 6.3% from the previous year.
Construction on homes is at the lowest level since last September.
Economists polled by the Wall Street Journal expected housing starts to rise to a 1.59 million rate from June’s initial estimate of 1.55 million.
In May, housing starts were revised from a drop of 14.4% to 1.55 million to a drop of 11.9% of 1.59 million.
Building permits for new homes fell 0.6% to 1.69 million in June. Economists expected building permits to fall to a 1.68 million rate from May’s initial estimate of 1.7 million.
Key details: On an unadjusted basis, housing starts fell 0.7% in June.
The construction pace for single-family homes fell 8.1% in June, while apartment starts jumped 15%.
Permits for single-family homes fell 8% in June, while permits in buildings with at least five units rose 13.1%.
Regionally, construction of homes rose in the Northeast and the West, by 10.6% and 3.7% respectively. Construction in the Midwest and South fell by 7.7% and 4.8%.
But construction of single-family homes was much weaker in the Northeast and the West. Only the Midwest saw single-family housing starts rise.
The pace of permits for single-family homes surged in the Northeast by 18% and in the West by 5.8%, but plunged in the Midwest by 15.7%. Permits issued in the South dropped by 2.1%.
Big picture: Even though demand for homes in the U.S. is cooling, “builders will remain busy for some time working down backlogs of unfilled orders, even allowing for rising cancellations,” said Richard Moody, chief economist at Regions Financial.
But the drop in housing starts, which follows weak sentiment expressed by homebuilders in July, hints at further gloominess in the housing sector.
Looking ahead: Single-family starts, “which contribute more to GDP on a per-unit basis, will remain under pressure ahead,” Katherine Judge of CIBC Economics said in a note.
That means that the slowing pace of housing starts in Q2, on top of weaker home sales, “suggest that residential investment was a drag on growth over the quarter,” Judge added.
Market reaction: U.S. stocks
DJIA,
were trading higher early Tuesday. The yield on the 10-year Treasury note
TMUBMUSD10Y,
fell to 2.97%.
