Reflecting a steep drop in multi-family housing starts, the Commerce Department released a report on Wednesday showing a bigger than expected decrease in new residential construction in the month of June.
The Commerce Department said housing starts slid by 0.9 percent to an annual rate of 1.253 million in June after slipping by 0.4 percent to a revised rate of 1.265 million in May.
Economists had expected housing starts to fall by 0.6 percent to a rate of 1.261 million from the 1.269 million originally reported for the previous month.
The bigger than expected decrease came as multi-family starts nosedived by 9.2 to a rate of 406,000, more than offsetting a 3.5 percent jump in single-family starts to a rate of 847,000.
Housing starts plummeted by 9.2 percent in the South and 4.9 percent in the West but soared by 31.3 percent and 27.1 percent in the Northeast and Midwest, respectively.
The report also unexpectedly showed a substantial pullback in building permits, an indicator of future housing demand.
Building permits plunged by 6.1 percent to an annual rate of 1.220 million in June after climbing by 0.7 percent to a revised rate of 1.299 million in May.
Economists had expected building permits to rise by 0.5 percent to a rate of 1.300 million from the 1.294 million originally reported for the previous month.
With the much steeper than expected drop, building permits fell to their lowest level since hitting a rate of 1.201 million in May of 2017.
While single-family permits crept up by 0.4 percent to a rate of 813,000, multi-family permits plummeted by 16.8 percent to a rate of 407,000.
Compared to the same month a year ago, housing starts in June were up by 6.2 percent but building permits were down by 6.6 percent.
“The [housing] sector has been facing significant headwinds,” said ING Chief International Economist James Knightley. “Material costs have been rising and there is the obvious exposure to trade tensions given imports of timber and metal.”
“Nonetheless, we remain upbeat on the prospects for U.S. housing,” he added. “After all, the consumer is in great shape with employment at record levels, wages rising strongly in real terms and confidence remaining firm.”
Knightley noted mortgage rates have plummeted in the wake of the plunge in U.S. Treasury yields, which have come under pressure amid expectations of a near-term interest rate cut by the Federal Reserve.
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