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U.S. Housing Starts Fall; Canadian Starts Up Slightly

Nationwide housing production fell 9.3 percent to a seasonally adjusted annual rate of 893,000 units in June, according to newly released figures from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The drop was due primarily to a nearly 30 percent decline in the South. All other regions posted monthly gains.

“A modest 2.6 percent increase in single-family permits falls in line with the general optimism that we are hearing from our builders,” said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Del.

Single-family housing starts were down 9 percent to a seasonally adjusted annual rate of 575,000 units in June, while multifamily production fell 9.9 percent to 318,000 units. Regionally in June, combined single- and multifamily housing production rose in the Northeast, the Midwest and the West, with respective gains of 14.1 percent, 28.1 percent and 2.6 percent. Total production fell by 29.6 percent in the South, the nation’s largest region.

“Take away the South and nationwide housing starts would have been in positive territory this month,” said NAHB Chief Economist David Crowe. “This sharp regional decline could be due in part to lots and labor shortages, which are particularly acute in that part of the country. However, the general direction of housing production is trending upward, and we expect 2014 to be a positive year.”

Issuance of building permits registered a 4.2 percent decline to a seasonally adjusted annual rate of 963,000 units in June. Multifamily permits dropped 14.9 percent to 332,000 units while single-family permits increased 2.6 percent to 631,000 units. The Northeast, South and West registered overall permit losses of 15.5 percent, 6.3 percent and 1.8 percent, respectively, while the Midwest posted a 6.6 percent gain.

Housing starts in Canada were trending at 185,939 units in June compared to 184,019 in May, according to Canada Mortgage and Housing Corporation (CMHC). The trend is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.

“The trend in housing starts has been stable since March 2014, down from the range of 191,000 to 196,000 seen between September 2013 and February 2014. This is in line with CMHC’s analysis indicating that the new home construction market in Canada is headed for a soft landing in 2014,” said Bob Dugan, CMHC’s chief economist. “Builders are expected to continue to manage their building activity to ensure that demand from buyers seeking a new unit is channeled toward unsold units, whether these are under construction or completed.”

CMHC uses the trend measure as a complement to the monthly SAAR of housing starts to account for considerable swings in monthly estimates and obtain a more complete picture of the state of the housing market. In some situations analyzing only SAAR data can be misleading, as they are largely driven by the multiples segment of the markets which can be quite variable from one month to the next.

The standalone monthly SAAR was 198,185 units in June, a slight increase from 196,993 in June. The SAAR of urban starts increased to 181,979 units. Multiple urban starts decreased to 118,815 units while the single-detached urban starts segment increased to 63,164 units.

In June, the seasonally adjusted annual rate of urban starts increased in Atlantic Canada and the Prairies, and decreased in Quebec, Ontario, and British Columbia.

Rural starts were estimated at a seasonally adjusted annual rate of 16,206 units.