Even though builders are increasingly becoming more optimistic according to the latest NAHB release yesterday, housing starts are showing major signs of weakness similar to what mortgage applications have been signaling.
Housing starts came in well below expectations in June as they posted 893K annualize units started compared to expectations of 1.02 million. Single family housing starts are actually negative on a year-over-year basis now (-4.33%).
Regionally, we have seen a major fall off in the South which is the largest housing market in the US. Units started have fallen from 533k annually in April to 375K annually in June. The good news is the the Midwest, which has now become the second largest housing market, has increased nicely this year form only 62K units annually in January to 219K units annually in June. On a year-over-year basis the South is down over 10% while the Midwest is up an astounding 79.5%.
Unfortunately, building permits did not provide a silver lining this time as they too came in below expectations (963K vs 1.038 million). Single family permits are just barely positive on a year-over-year basis. Continued weakness in lumber suggests that building permits may continue to underwhelm in the near future.