U.S. single-family housing starts, permits decline in June as mortgage rates weigh on market

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US housing starts and permits decline

Highlights

U.S. single-family housing starts decline 0.2% in June to 895,000 units annualized, with permits down 2.4% to 871,000 units as mortgage rates rise.
Starts for housing projects with five units or more surge 76.3% in June to 513,000 units, pushing overall starts up 19.0% to 1.427 million units.
Congress passes bipartisan housing affordability legislation restricting investment firm ownership and easing construction reviews, but implementation delays remain a concern.

June housing data signals softer single-family demand

As reported by Reuters, citing the Commerce Department's Census Bureau, single-family housing starts, which account for the bulk of homebuilding, slip 0.2% in June to a seasonally adjusted annual rate of 895,000 units.

Single-family homebuilding drops 3.2% from a year earlier in June. Permits for future construction of single-family homes fall 2.4% last month to a rate of 871,000 units, and decline 0.2% year-on-year.

The rate on the 30-year fixed mortgage has increased by nearly 60 basis points since the U.S. and Israel attack Iran at the end of February, reaching an 11-month high of 6.55% this week, Freddie Mac data show. A National Association of Home Builders survey on Thursday shows sentiment among single-family homebuilders remains depressed in July, with economic uncertainty tied to the Middle East conflict, rising material prices, high land costs and elevated borrowing rates weighing on the sector.

Inventory pressures and multifamily gains reshape outlook

Although the country still faces a housing shortage, especially for starter homes, the stock of unsold new homes on the market remains near levels last seen in late 2007, when the housing market was collapsing.

Builders welcome bipartisan housing affordability legislation recently passed by the U.S. Congress, which includes measures to restrict single-family homeownership by investment firms and to waive or accelerate environmental reviews for construction projects. They say, however, that the provisions will take time to be implemented, and the bill becomes law despite President Donald Trump not signing it while demanding passage of a separate voting bill.

By contrast, starts for housing projects with five units or more, a volatile segment, soar 76.3% in June to a rate of 513,000 units and rise 19.3% from a year earlier. Overall housing starts jump 19.0% to a pace of 1.427 million units, up 3.5% year-on-year, while multifamily building permits drop 4.9% to a rate of 445,000 units and total permits fall 3.0% to 1.367 million units, down 2.3% from a year earlier.

Our earlier article on U.S. housing affordability showed that higher borrowing costs and record home prices pushed the qualifying income for a median-priced single-family home to $109,152 in June, extending a months-long affordability slide. We also noted that while price growth has cooled versus the pandemic era and new housing-supply legislation aims to help, any meaningful relief for buyers is expected to take time.

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