US housing starts drop to nine-month low in June

US housing starts dropped to a nine-month low in June, according to data released by the Commerce Department on Tuesday.

Housing starts fell 12.3% to a seasonally-adjusted annual rate of 1.173m, versus expectations for a smaller drop to 1.320m and marking the biggest monthly drop since November 2016. Meanwhile, the May rate was revised to 1.337m from 1.350m.

Single-family housing starts were down 9.1% to 858,000 from the previous month's figure, which was revised to 944,000. This was the slowest rate since December.

Permits for new construction were down 2.2% from May to a seasonally-adjusted annual rate of 1.273m, falling short of consensus expectations of 1.330m.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: "The headline numbers look terrible, but the details are much less bad, with the most important number in the report, single-family permits, rising by 0.8%. The headline starts and permits number were both pulled down by big drops in the volatile multi-family sector, falling 19.8% and 7.6% respectively. Single-family starts dropped too, but the May reading always looked unsustainable and a correction was in the cards.

"Stepping back from the monthly noise, the key point here is that core single-family construction tends to move in line with new home sales; the trends in both have been about flat, more or less, since last fall. Higher mortgage rates and slightly higher lending standards appear to be offsetting the favourable impact of rising employment. We expect no change in this story over the next few months. Housing market activity - sales and construction - likely has peaked for this cycle."