US DATA: Single-Family Housing Activity Continues To Deteriorate

Residential construction activity slightly surprised to the upside in June, with starts partially rebounding from a very weak May and permits unexpectedly increasing. Overall activity remains very weak, however.

• Starts came in at 1,321k (1,300k expected, 1,263k prior upwardly rev by 7k), with permits up 3k to 1,397k.
• The overall trends are unambiguously poor though: while this is a rebound of sorts for starts, May was the weakest month since 2019 (ex-start of pandemic), in what looks increasingly like a weather-hit month, and the 3M/3M annual growth rate is -19.4% with Y/Y -0.5%.
• Building permits remained below the 1,400k mark for a 2nd consecutive month for the first time since the pandemic, and are 2% below year-before levels.
• Single-family home activity had been keeping the broader sector relatively buoyant as multi-unit construction faded over the last couple of years, but that appears to be at an end.
• Single-family permits (a leading indicator of construction) fell to 866k from 899k prior, a fourth consecutive month of contraction to the lowest level since June 2020.
• Multi-unit permitting actually spared broader blushes, rising to 531k from 495k for one of the highest readings of the last couple of years, but this is the more volatile of the two series and remains well below the 600-800k range seen in the pandemic re-opening boom.
• As the June National Association of Home Builders (NAHB) survey showed, sentiment for new construction is as weak as it gets, with price-cutting at the highest in 3 years and prospective buyer traffic at post-2020 lows.
• Residential activity will drag on GDP in 2025, and with input costs (both labor and materials amid immigration crackdowns/tariffs) likely to remain buoyant, an improvement in affordability is likely to depend on whether mortgage rates start coming down later this year.