Housing starts in the U.S. fell 9.3% in June, the second consecutive monthly decline, according to the U.S. Commerce Department, pushing the annual rate down to 893,000, the weakest showing since last September.
The decline was driven by a 30% drop in the South, the largest monthly decline on record for that part of the country.
Despite the overall decline, year-over-year, starts are up 7.5%, thanks to a 38% rise in multi-family home starts. Single-family starts, on the other hand, are down 4.3% during the same time.
The monthly decline was nearly equal across single-family and multi-family starts, down 9% and 9.9%, respectively.
The number of home building permits issued, an indicator of future activity fell 4.2% in June and was centered in the multi-family sector, down 14.9%, while the number of single-family permits rose 2.6%. Over the past 12 months, permits are up 2.7%, thanks to a near 7% annual rise in multi-family permits. Single-family permits are up only 0.6% year-over-year.
“While sales activity has picked up in recent months after a lackluster first quarter, homebuilders remain cautious amid a still uneven recovery,” said Lindsey Piegza, chief economist the investment firm Sterne Agee. “As Federal Reserve Chairman Yellen noted in her testimony earlier this week, the housing market activity ‘has shown little recent progress’ as potential buyers are discouraged by higher mortgage rates and rising prices. As rising home prices continue to outpace income growth, many potential homebuyers are being squeezed out of the market, limiting new demand.”
This report follows a wider one on the economy released Wednesday by the Federal Reserve indicating overall economic activity continues to expand.
The latest Beige Book said the pace of economic growth was characterized as moderate in the Fed’s New York, Chicago, Minneapolis, Dallas, and San Francisco districts, while the remaining districts reported modest expansion. Most districts were optimistic about the outlook for growth.
It noted overall consumer spending increased in every district, while retail sales grew modestly in most districts.
Reports on real estate activity varied across the districts, while many reported low inventories and increasing home prices, but demand was mixed.
Labor market conditions improved, as all twelve Districts reported slight to moderate employment growth though a shortage of truck drivers was noted in the Cleveland, Richmond, Atlanta and Kansas City districts.