June Housing Starts, NAHB, Mortgage Apps

Residential Construction Bounced Back in June

  • Housing Starts increased in June by 8.3 percent to a 1,215,000 unit annual rate.
  • Permits for new residential construction increased by 7.4 percent to a 1,254,000 unit pace in June.
  • Builder Confidence eased in early July.

Builders built in June, increasing housing starts by 8.3 percent, to a 1.215 million unit annual rate. The volatile multifamily component bounced back the most, gaining 13.3 percent for the month and hitting a 0.366 million unit rate. This is still well below the recent peak rate of 0.507 million from June 2015. The trend line in multifamily construction looks like it is sloping down despite the bounce back in June. Overbuilding, resulting in slower absorption and weaker rent growth, is a weight on many multifamily markets. We look for cooler multifamily construction in the second half of this year and into early 2018, with more emphasis from builders on the single-family side. Single-family starts increased by 6.3 percent in June, to a 0.849 million unit rate. This is still below the recent peak rate of 0.877 million from this past February, but the trend line looks positive. Building permits were also stronger in June, up by 7.4 percent to a 1.254 million unit rate. Multifamily permits were up 13.9 percent, to a 0.443 million unit rate. Single-family permits gained 4.1 percent, to hit a 0.811 million unit annual rate. Housing is still underperforming relative to recent expansion cycles. One reason is student debt. According to a new study by economists at the Federal Reserve Bank of New York, student debt is partially responsible for the observed decline in homeownership among 28-30 year olds from 2007 through 2015. According to the NY Fed, if student debt had remained at 2001 levels, there would have been 360,000 more 28-30 year old homeowners in 2015.

Builder confidence eased in early July according to the National Association of Homebuilders. Builders are increasingly concerned that rising material prices are hurting affordability. There may also be some drag on builder confidence from the slow legislative process in Washington.

Mortgage applications increased in mid-July after falling in early July. We see no clear trend through mid-July in both purchase and refi apps. The 12-week moving average for total apps remains on a moderate upward trend. According to the Mortgage Bankers Association, the rate for a 30-year fixed rate mortgage was stable at 4.22 percent for the week ending July 14.

Market Reaction: Stock indexes were up at the open. The yield on 10-Year Treasury bonds is up to 2.26 percent. NYMEX crude oil is up to $47.00/barrel. Natural gas futures are down to $3.06/mmbtu.

For a PDF version of this Comerica Economic Alert click here:  Housing_Starts_071917.

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