June 2024 Housing Starts: Housing Starts Rebound in June, Single-Family Construction Slows Less Than Expected

• Building permits issued in June increased to 1,446,000 (SAAR). That’s 3.4% above the revised May rate but 3.1% lower than a year ago.
• Housing starts increased to 1,353,000 (SAAR) in June, up 3.0% from the revised May estimate but 4.4% lower than a year ago, according to the U.S. Census Bureau. 
• Single-family housing starts decreased to 980,000 (SAAR) in June, down 2.2% from May but still 5.4% above last June.

What happened: In June, fewer single-family homes were built compared to the previous month, as home sales remained weak and price growth slowed. However, single-family housing starts still remained 5.4% above last year’s pace while construction on buildings with 5 or more units was still well below last year’s level – attributed in large part to the already large number of apartment buildings being completed and easing apartment rent growth.

Why this matters: While housing starts are up this month, the slowdown in single-family housing starts reflects a cautious outlook from builders largely due to easing housing demand and rising inventory. However, the increase in building permits is perhaps a sign that builders haven’t thrown in the towel just yet.

The surge in mortgage rates this spring stretched housing affordability and caused demand to coast at a time where it usually accelerates. According to Zillow data, homes that sold went pending in just 15 days - two more days than a month ago. While appropriately priced homes still sell fast, most homes are staying on the market longer. Though many expected home sales would have rebounded from last year’s trough, sales through the first half of this year were below year ago levels and total for-sale inventory is now up 22.7% from this time last year. 

Looking ahead, mortgage rates are expected to ease and a decline in the number of existing homes coming on the for-sale market during the second half of this year could leave the door wide open for newly built homes.

Successful builders are using incentives to make the math work for homebuyers. According to the National Association of Home Builders, sixty-one percent of builders were using sales incentives other than price cuts to improve sales in June. Even though more builders are reducing their prices, with the share increasing to 29% from 25% in May, the average price cut has held steady at 6%.