US housing starts fall 9.6%

HOUSTON (ICIS)–US housing starts in July fell 9.6% month on month and 8.1% year on year, according to latest data from the US Census Bureau on Tuesday.

US housing data, July 2022

	Annual rate	+/- from June 2022	+/- from July 2021
Housing starts	1,446,000	-9.6%	-8.1%
Building permits	1,674,000.	-1.3%	+1.1%

HOUSING STARTS
ICIS senior economist Kevin Swift said that at 9.6%, July’s decline in housing starts was larger than expected. It was the third decline in row.

He made the following points:

• Single-family starts fell by 10.1% during the month, and the multi-family segment 8.6%. The latter is more volatile than the single-family segments.
• Single-family starts were off 18.5% year on year while multiple-family starts were up 18.0%.
• During July, housing activity fell sharply in the Midwest (-33.8%), south (-18.7%), and west (-2.7%). There was a large 65.5% gain in the northeast.
• Economists’ project housing starts of 1.60m in 2022 and with rising mortgage interest rates and affordability issues, starts will fall to 1.37m in 2023, and 1.26m in 2024, despite favourable demographics, Swift said. Housing starts were 1.61m in 2021.
  
  BUILDING PERMITS
  Regarding July’s building permits, the weakness was in the single-family segment, where permits fell 4.3%, the fifth monthly decline, the economist said.
• The single-family segment is more sensitive to higher interest rates and housing costs.
• Reflecting eroding affordability, single-family permits were off 11.7% year on year.
• Reflecting higher rents, multiple-family permits rose 2.8% in July and were up 23.5% year on year.
• Regionally, the weakness in July permits was led by an 12.0% decrease in the west and an 0.1% decline in the south. The weakness more than enough to offset solid gains in the northeast and Midwest.

In related news, for the month of August, US home builder confidence swung to negative, ICIS reported earlier.

The industry has entered a housing recession, brought on by tighter monetary policy from the Federal Reserve and persistently elevated construction costs, according to Robert Dietz, chief economist for the National Association of Home Builders (NAHB).

The housing market is a key consumer of chemicals, driving demand for a wide variety of chemicals, resins and derivative products, such as plastic pipe, insulation, paints and coatings, adhesives and synthetic fibres, among many others.

The weakening US housing market has dragged down demand for some plastics and chemicals for which construction is a large end-market.

US contracts for polyvinyl chloride (PVC) were assessed lower because of lower domestic demand and falling spot export prices.

Additional reporting by Al Greenwood

Please also visit the ICIS topic page on construction

Thumbnail shows the hard hat that is worn by home builders and other construction workers. Image by Shutterstock.