Amid surging layoffs in the real estate market, a collapse in homebuilder sentiment, soaring mortgage rates and plunging mortgage applications, it is hardly a surprise that analysts expected a drop in Housing Starts and Permits in May (-2.1% MoM and -1.3% MoM respectively), but those numbers were again destroyed as Housing Starts crashed 9.6% MoM and Permits plunged 3.3 MoM.
In absolute SAAR terms, housing permits dropped to the lowest level since Sept 2021 while start collapsed to levels not seen since Feb 2021.
Breaking down the numbers we find the following composition for permits which are notable in that multi-family (rental) units continue to rise even as single-family crater.
- Permits, single-family, down 4.3% SAAR and down 11.7% YoY
- Permits, multi-family, down 2.5% SAAR, up 26.2% Y/Y
The drop was even more pronounced in housing starts, where single-family units collapsed to just 916K, the lowest since June 2020.
- Single-family starts -10.1% SAAR, and down 18.5% Y/Y
- Multi-family starts down 17.4% SAAR, and down 10.0% Y/Y
Given the ongoing collapse of homebuilder sentiment, which is now in the worst slump since 2007, we suspect permits (forward-looking) will only get worse
Finally with Redfin reporting that a near record 63,000 potential buyers backed out of their housing contracts as the bottom falls out of the housing market, we suspect the new home inventory won't get any help anytime soon as affordability crashes to multi-decade lows.