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Macro Flash Report

Housing Data

Takeaway: July’s start to housing data underscore the consequence of elevated interest rates in the sector. While it will take some time for the tailwinds of the cutting cycle to have their full impact, the fact that starts and permits have remained near 2019 levels despite current conditions is encouraging for the longer-term outlook.

Housing Starts & Building Permits

In July, Housing Starts dropped by -6.8% to an annual rate of 1238k, the lowest level since 2020 and the sharpest decline since March. This downturn contrasts with the revised 1.1% increase in June and the market expected -1.5% decline to an annual 1333k.

  • The decrease was mainly driven by a significant -14.1% drop in single-family units, which fell to 850k and outweighed the 7% rise in multi-family units, which increased to 363k units.
  • Regionally, the South experienced the most substantial decline, with starts falling by -13.6% to 640k, potentially reflecting the impact of Hurricane Beryl.

*High mortgage rates and prices, are keeping new home inventories elevated, currently at highest levels since 2008, spurring builders to scale back on construction.

Building Permits fell by -4% to an annualized rate of 1396k in preliminary estimates, marking the lowest level in four years and falling short of the forecasted -2.0% decline to an annual 1425k.

  • Permits for multi-family units dropped sharply by -12.4% to 408k, while single-family authorizations saw a slight decline of -0.1% to 938k.

Looking forward, the housing sector is likely to face the ongoing challenges as the August NAHB Housing Market Index declined to 39, the lowest point this year, missing the anticipated rise to 43. Builder sentiment continues to decline, the fourth consecutive month, due to affordability issues and buyer hesitation amid high interest rates and elevated home prices.

  • Present sales conditions and prospective buyer traffic both dropped by 2 points, while the outlook for future sales showed a slight improvement, rising by one point to 49.
  • Amid these challenges, builders are increasingly resorting to price cuts, 33% of builders reduced prices in August, up from 31% in July and 29% in June, to boost sales.