U.S. housing starts retreated in June after a sharp increase in May. Starts fell 8% in June to 1.434 million annualized units from 1.559 million in May (revised lower from 1.631 million). This was weaker than the consensus expectation for a decline to 1.480 million. Single-family starts fell 7.0% in June to 935,000 from 1.005 million. Multi-family starts fell 9.9% to 499,000 from 554,000. 

The number of construction permits fell 3.7% on the month driven by a big decline in multi-family permits. Single-family permits rose 2.2% on the month while multi-family permits fell 12.8%. The number of new housing units authorized by building permits but not started fell 2.1% to 281,000 in June from 287,000 in May. It remains near the highest level since 1974. Building completions fell 3.3% but were up 5.5% from a year ago. 

Housing starts and permits tend to be highly volatile from month to month, but homebuilding sentiment improved in the first half of the year thanks to a resilient U.S. economy and the Federal Reserve signaling an end to its hiking cycle. 

With the Federal Reserve likely to raise the Fed funds rate again next week, mortgage rates will remain high in the near term before declining later this year. PNC expects slower activity in the housing market as elevated mortgage rates and declining affordability weigh on housing demand. Completions should improve as inflation moderates, the labor market slackens and supply chains improve.

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance, and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.