Housing Construction Pauses

According to the Census Bureau and HUD, housing starts activity dipped 9.3% in June to an 893,000 seasonally adjusted annual rate. The drop was concentrated in the South region where single-family starts fell 70,000, accounting for more than the total national drop of 57,000. Multifamily starts also fell 88,000 units in the South accounting for more than the 35,000 total drop for the US. The South was the only region with a fall in total starts.

Total Housing Starts

Permits were also down 4.2% but the fall was concentrated in multifamily, which was down 15% and broadly felt in three of the four regions. Only the Midwest experienced an increase (4.6%) in multifamily permits. Even with this monthly drop, the three-month moving average of multifamily permits remains near 400,000 a well above historic levels as most newly formed households are becoming renters.

Single-family permits were up 2.6% to 631,000 with three of the four regions reporting increases. Only the Northeast recorded a dip of 3.8% in single-family permits.

The unusual fall in construction activity in the South region extended to a 13.4% drop in single-family homes completed. The compilation of unique trends only in the South does not appear to be connected to weather effects or any regulatory changes that would cause builders to move construction to July.

The only remaining explanation is the continuing problems getting sufficient labor and lots for production. The faster moving markets in the energy belt, particularly Texas, are the most likely to see an even greater limit to production given the difficulty in competing in the labor pool against strong wage growth in the energy sector.

The dip in June single-family construction does not appear to be a general slowdown but rather an anomaly in June data that we expect to see corrected later this year as demand continues to pick up from pent-up demographics.



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