U.S. week ahead
Housing starts • Tuesday
Residential construction looks set to continue scaling back. In June, starts surprised to the upside, rebounding from the prior month decline and largely reflecting a substantial rebound in the volatile multifamily category. However, the trend in housing construction has been hardly energetic. Over the past several months, single family starts generally have grinded lower. Mutilfamily starts have been relatively more resilient, but lacking upward momentum.
Its difficult to see a catalyst for stronger growth on the near-term horizon. Forward-looking indicators such as building permits and builder confidence suggest activity remains tepid. Meanwhile, higher mortgage rates continue to exert pressure on affordability for buyers, who are also contending with a lackluster jobs market and slowing real income growth. Builders are navigating their own challenges, including higher construction costs, skilled labor shortages and elevated inventory relative to sales. In terms of multifamily, the apartment market is showing signs of improvement. However vacancy rates remain elevated, largely due to still-elevated new supply. All told, we expect total housing starts declined to a 1322K-unit pace in July.