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The housing market, which has been one of the economic recovery's constants over the past several years, really hit a speed bump in the latest month, as the most high-profile data point of the housing series, housing starts, faltered badly.

Specifically, after soaring past the one million annualized rate in March, as starts rose to 1.005 million units, building plummeted to 852,000 homes in April. That decline appeared to be something of an aberration, however, as starts rebounded to an upwardly revised annual rate of 928,000 homes in May (initially estimated at 914,000 units).

Further, expectations had been for an additional gain, up to 950,000 homes, for June. However, such estimates proved to be way too high, as the June tally came in at a disquieting 836,000 homes. Not only was that a nearly 10% decline on a month-to-month basis, but the aggregate total of such building was the lowest since last August.

At the same time, building permits, which had been expected to leap forward to an even one million units in June, up from a very compelling 985,000 houses in May, fell back notably, as well, plunging to just an annualized rate of 911,000 homes in the latest month. This last item was especially troubling, as permits are believed to be much more of a leading indicator than actual starts. At times, the trend in starts and permits will run counter to one another. Therefore, even a marked move in one direction in either of these categories can be reasoned away as somewhat of an aberration, especially if it is countered by move in the opposite direction in the other housing component. This time, both starts and permits moved lower in tandem. So these latest results could be more meaningful. We shall see next month.        

Of course, it also is best not to over dramatize a one-month move, as such changes can often be reversed the following month--as we saw in both April and May. So, we are not yet ready to declare that the housing recovery is at an end. It may just be a pause.

In any event, the latest news must be seen as at least a short-term concern, especially as declines were registered in each of the four regions, the Northeast, the Midwest, the South, and the West, with double-digit pullbacks in the Northeast and the South, which are, respectively, the smallest and largest of the four regions for new building. Meantime, permits fell in three of the four locales, with only the Northeast showing a gain. Note that one possible explanation for this sudden weakness, we surmise, is the recent sharp uptick in mortgage rates, and some lingering caution on the part of many builders in the face of that increase in borrowing  costs, which could, in turn, could dissuade some less-than-eager potential home buyers. 

Clearly, this was a disappointing pair of metrics, with the only possible positive aspect of the reports being that any likelihood of an evolving inventory glut on the construction front has been put at rest--at least in the short run.

At the time of this article's writing, the author did not have positions in any of the companies mentioned.