• Housing starts dropped even further from the steep decline that occurred in May to 1.56 million, down 2% from revised May 2022 figures and down 6.3% from June 2021, according to the U.S. Census Bureau. 
• Housing permits issued in June were down 0.6% from May and up 1.4% from a year ago, to 1.69 million (SAAR).
• 1.37 million (SAAR) homes were completed in June, down 4.6% from May and up 4.6% year-over-year.

Builders continue to pump the brakes on getting new homes onto the market amid a cooling housing market. Housing starts were down from the steep decline that occurred in May and experienced the first year-over-year decline since the spring of 2020. Yet, even with the sharp reduction in confidence and lackluster stats, it’s important to note that, at least for now, building activity remains strong relative to pre-pandemic norms. Permit activity followed a somewhat similar path with a slight drop from May, but just over June 2021 permitting levels – just beating consensus. 

But, while starts and permit activity remain higher than pre-pandemic norms, and constraints that have hamstrung the industry for months are finally easing, home construction is facing some headwinds in the near future amid changing market conditions. Home builder sentiment plummeted in July to early pandemic lows – the second steepest drop in the series after April 2020 – as rising mortgage rates and worsening affordability have cooled previously red-hot demand for housing. Despite recent drops in lumber prices, home completions declined in June, reducing the amount of new inventory that hit the market. While the market is cooling, new inventory is still necessary to soften price growth in coming months, and lacking new construction figures point to a longer recovery to pre-pandemic inventory norms keeping pressure on prices. However, as demand continues to cool, we may see building activity suppress even further – until there are meaningful improvements in affordability incentivizing builders to reaccelerate their activity.