Housing Starts, Permits Decline as Multi-family Sector Drags

The US Commerce Department reported Wednesday that housing starts declined nearly 10 percent in June while permits for future home construction slipped 7.5 percent. Both figures surprised analysts and are solid indicators that home construction fell off at the end of the second quarter. A separate report Tuesday showed growing confidence among builders, however, suggesting construction will likely pick up in the second half of the year.

According to the Commerce Department report, housing starts fell 9.9 percent from May to June to a seasonally adjusted annual pace of 836,000 units. The figure marks the slowest pace for new housing projects since last August and is considerably lower than the consensus estimate of a 959,000-pace from a group of economists that took part in a recent Reuters poll. Permits for future projects, meanwhile, fell by 7.5 percent to an adjusted pace of 911,000 units, well below the 1 million-unit pace expected by the Reuters economists.

Despite the unexpected declines in starts and permits last month, economists are still relatively optimistic about the housing sector moving forward, particularly given that the bulk of the declines were fueled by weakness in the volatile multi-family housing sector. Starts of single-family housing units only slipped 0.8 percent last month to an adjusted 591,000 pace, while starts for multi-family units fell a staggering 26.2 percent to a 245,000 pace. Permits for single-family homes, meanwhile, rose 0.6 percent to a 624,000 unit pace.