By Dr Denver H. Bubble
June continued the summer of blues for the housing market. Permits dropped 2.2% month over month vs +2.2% expected. Housing Starts did even worse collapsing 12.3% month over month. The margin of error was 8.3 % points. This happened after May's 4.8% rise month over month. Analysts believe this drop could be from construction labor shortages and rising material costs. Rising material costs, such as lumber, and a shortage of qualified construction workers has pushed up input costs for home builders.
This was the third straight month of declining permits in a row, a largest since November 2016. The drop in permits were from 424K to 387K, an 8.7% drop. Single-family were up 0.8%.
Both single-family and multifamily felt the pain in the collapse in starts. Single-family starts were down from 944K to 858K and multifamily were down 381K to 304K.
Existing home sales tumbled 0.6% month over month vs expectations of a 0.2% It's also off a downwardly revised May print of 0.7% month over month, with median home price hitting a record high $276,000 nationwide. Compared with a year earlier, sales in June declined 2.2%. Home sales have now declined on an annual basis in five of the first six months this year showing signs of a slow down. Not helping the matter, the average interest rate on a 30-year fixed-rate mortgage already has risen to 4.57% in June from 4.03% in January, according to Freddie Mac. Also adding to pricing pressures which will help buyers, there were 1.95 million existing homes available for sale last month, up 4.3% from the prior month and 0.5% from a year ago. That is the first yearly inventory increase since the middle of 2015, according to Lawrence Yun, the trade group’s chief economist. Denver has also seen inventory up 25% in May and 15% in June. So far the trends a pointing to drop in prices in the second half, especially if the supply of housing keeps coming on and interest rates go up.