The figures: Seasonally adjusted housing starts ran to 1.173 million a year in June, according to the Commerce Department on Wednesday.
Economists surveyed by MarketWatch had forecast a rate of 1.303 million.
What happened: Construction workers put a lot fewer houses into operation in June, signaling more of the stop-start rhythm that characterizes the uneven recovery of their homes. The launch season in June was 12.3% lower than in May and 3% lower than in the previous year.
Permits signaling future start activity were seasonally adjusted at 1.273 million pace.
Also read: Goodbye Renter Nation: Americans Still Want Homeowners
Large Picture: Cured by higher input costs, builders struggle to give buyers what they want ̵
Government data on housing are based on small samples, which means that they are often heavily revised. In June, the numbers from May and April were canceled. For the current year, take-offs are 7.8% higher than in the same period in 2017 and permits are 5.7% higher.
Market Reaction: In a note posted Tuesday before data release, BTIG analysts noted that their BTIG / HomeSphere Builder Survey posted only weak sales trends in June. A quarter of respondents said they had lower sales volumes than a year ago, while 51% saw less or less traffic than in June 2017.
"We believe that builders are trying to keep the price down to keep margins at cost Volume of the piece: 50% raised – most or all – Base prices in June, compared to May, "the analysts wrote. Two-thirds of respondents reported increased labor costs, while 86% reported higher material costs.
These higher prices may be too much for many buyers, despite robust demand for housing.
What they say: "If the launches do not recover in July, I'll start to worry, but right now I'd rather see the June surprise as more noise than signal," said Stephen Stanley, chief economist for Amherst Pierpont Securities. "Builders are certainly under great pressure: labor shortages, raw material cost increases, etc. But I still have to hear that anyone in the industry is complaining about weak demand."
Stanley and other economists were encouraged by the continued momentum for single-family allowed. In June, they rose 0.8% yoy and 4.6% yoy. A stronger pace in the construction of single-family homes is a builders' wager on home ownership. And because single-family homes are more labor-intensive than apartments, they are better for the economy.
Reading: We're probably home. Here's what that means.
Market Reaction: US stock futures saw little movement on Wednesday, signaling an open flat. The Dow Jones industry average
DJIA, + 0.22%
has not seen much movement this year, 1.6% by Tuesday.