US Housing Starts: Supply issues weighing a little more heavily on homebuilders - Wells Fargo

Analysts at Wells Fargo, take a look at the weakness seen in Housing Starts. Today’s data showed a decline of 12.3% (significantly below the slide of 2.2% expected). 

Key Quotes: 

“Housing starts came in well below expectations, with overall starts tumbling 12.3 percent to a 1.173-million unit pace. Single family starts fell 9.1 percent and starts of projects with 5 units or more tumbled 20.2 percent.”

“A little more than half of June’s drop was in the Midwest, where starts tumbled 35.8 percent after jumping 51.9 percent the prior month. The extreme volatility in the Midwest is likely due to some unusual seasonal distortions that caused an unusually large proportion of starts for the first six months of 2018 to occur in May.”

“Even after accounting for the unusual volatility in the Midwest, overall starts were still extremely weak and suggest that the housing sector has lost momentum.”

“The recent weakness in housing starts is perplexing, given continued tight supply of homes available for sale and fairly high levels of builder confidence. We suspect that supply issues are now weighing a little more heavily on homebuilders.”

“As disappointing as June’s housing starts are, they do not suggest the housing recovery has shorted out. Builders remain fairly optimistic and buyer traffic is reported to be fairly solid. Stronger job and income growth should push home buying higher in coming months.”