U.S. Housing Starts and Permits (July 2019)

Housing starts pull back sharply in July on lower multi-family starts

• U.S. housing starts declined by 4.0% to 1.191 million units (annualized) in July from a downwardly revised 1.241 million units in June. The market expected a slight increase of 0.2%. The revision reflected lower multi-family starts than previously reported, while single-family starts were revised higher.
• July's decline was also concentrated in the multi-family segment, which fell by 16.2% to 315k, following a similar 16.4% decrease the previous month. The larger single-family segment posted a modest 1.3% gain to 876k.
• Permits were up 8.4% in July to 1.336 million, reversing a 5.2% decline in June. Multi-family permits surged by 21.8% (reversing the 16.4% decline in June), while single-family permits rose slightly by 1.8% in July, rising for the third straight month.
• Regionally, starts generally turned negative, with only the West posting a marginal increase of 1.3%. The Northeast, Midwest and South were down by 13.8%, 6.2% and 4.3% respectively.

Key Implications

• New construction of residential houses continue to face headwinds in the U.S. The data for July registers the third consecutive month of falling housing starts. While the decline for the last two months has been limited to the multi-family segment (which is mainly apartment buildings), growth in the larger single-family segment has remained subdued.
• Despite lackluster starts, the jump in permits is positive, suggesting that builders may be positioning themselves to construct more units in the future. Still, as surveys attest, they face challenges such as rising costs, lack of land and labor shortages that could make it difficult to quickly scale up construction.  
• Demand fundamentals remain solid and if construction of more entry-level units can be ramped up, then a tight labor market and rising wages should support activity in the U.S. housing market.

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