Housing Starts Fell Again in July But Permit Activity Increased


Housing starts continued to disappoint in July, falling 4.0% compared with June to an adjusted annual rate of 1.191 million, according to estimates from the U.S. Census Bureau and U.S. Department of Housing and Urban Development.

Although that is down from the revised June estimate of 1.241 million units, it is up 0.6% from 1.184 million units in July 2018.

Starts of single‐family homes in July were at a rate of 876,000, an increase of 1.3% compared with about 865,000 in June.

Starts of multifamily units (five units or more per building) were at a rate of 303,000, down 17.2% compared with about 366,000 units in June.

It was the third consecutive month that housing starts fell on a month-over-month basis.

Permits were looking somewhat stronger. They rose to an annual rate of about 1,336 million – an increase of 8.4% compared with a revised rate of 1.232 million in June.

What’s more, overall permit activity was up 1.5% year-over-year, compared with a rate of 1.316 million in July 2018.

Permits for single-family homes were at a rate of about 838,000, an increase of 1.8% compared with about 823,000 in June.

Permits for multifamily dwellings were at a rate of about 453,000 in July, an increase of 24.8% compared with about 363,000 in June.

Housing completions were also up: They were at a seasonally adjusted annual rate of 1.250 million, which is an increase of 7.2% compared with about 1.166 million in June and up 6.3% compared with about 1.176 million in July 2018.

Odeta Kushi, deputy chief economist at First American, points out that recent turmoil in the global markets and fears of a recession have likely hurt consumer sentiment toward the housing market. But are the fears of a recession founded?

“While the inversion of the yield curve is one of the most vaunted indicators of recession risk, it does not mean that we’re imminently facing recession in the near future,” Kushi says in a statement. “Since the mid-1970’s, the yield curve has inverted 36 times for at least one day, but there have only been five recessions.”

As Kushi explains, there are many factors to consider beyond the inversion of the yield curve when determining recession risk.

“Single-family housing starts have been a more reliable indicator, because they are a reflection of both homebuilder and consumer confidence,” she says.

Still, “Homebuilders are reluctant to break ground on new projects if they fear the economy may slump later,” she says.

“Likewise, consumers are hesitant to make a large investment if they fear losing their jobs.”

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