It has been a really tough month for housing data. Over the last month, virtually every housing related indicator including Existing Home Sales, New Home Sales, Homebuilder Sentiment, Pending Home Sales, and now Housing Starts and Building Permits have missed consensus estimates. Not only did Friday’s Housing Starts and Building Permits miss forecasts, but they did so in a big way. As shown below, Housing Starts missed forecasts by 128K which was tied for the third biggest miss relative to expectations of the current expansion and the tenth largest in the last 20 years. Building Permits were nearly as weak relative to expectations as the 81K miss was the fourth largest miss relative to expectations of the expansion and the tenth largest miss relative to expectations since 2002.
The table below breaks down this month’s Housing Starts and Building Permits reports by the size of unit and region. In the case of both Starts and Permits, the weakness in May was driven primarily by a big slowdown in multi-family units, although single-family units were also down, just not by nearly as much on a m/m basis. On a y/y basis, single-family starts and permits are both up while multi-family units are down by double-digit percentages.
The first two charts below show overall Housing Starts and Building Permits since 2005. In both cases, current levels are down over 14% from their cycle peaks, but the chart of Building Permits looks a lot more to be in the process of rolling over than Housing Starts.
On a single-family basis, current levels of starts and permits are not down nearly as much as the headline readings. In both cases, May’s readings are down by less than 7% and aren’t quite showing signs of rolling over yet.
Multi-family units, however, are another (ugly) story. These readings have completely rolled over in the last several months and are down by over 40% from their cycle highs and not far from new lows since those peaks.