The boom in US home construction abated a bit in June, data released on Wednesday suggested.

A month on from what, as initially reported, was the biggest increase in housing starts since 2016, the pace of new construction receded, Commerce Department figures showed.

The 1.43 million annual rate observed last month was short of consensus, even as it was above pre-pandemic levels. These updates are watched closely at a pivotal time for the US housing market.

June’s 8% drop was the largest in 11 months. May’s blockbuster figures were revised lower to show a 15.7% increase, less ebullient than the originally reported 22% surge.

By now, most readers can recite the narrative from memory. Americans are being driven to new construction amid an acute dearth of resale inventory. Homebuilders have stepped into the void to backfill supply.

Wednesday’s starts and permits data for June came a day after an update on the NAHB’s gauge of builder sentiment, which rose a seventh month in July. Shares of US homebuilders surged in the first half of 2023.

“The lack of resale inventory means prospective home buyers who have not been priced out of the market continue to seek out new construction in greater numbers,” NAHB Chairman Alicia Huey remarked. “At the same time, builders are troubled over rising mortgage rates approaching 7% and continue to grapple with supply-side challenges, including ongoing scarcity of electrical transformer equipment and growing concerns about lot availability.”

Wednesday’s government data showed a 7% decline in single-family starts, which track the NAHB sentiment gauge closely.

It was notable that May’s pace of singe-family new construction was revised up to 1.005 million, the first time the annual rate eclipsed the one million threshold since June of last year, when prices peaked.

The starts figures lag the sentiment updates by a month. Huey cited “tightening monetary policy” and higher mortgage rates for June’s underwhelming starts print. “While builders have slowed construction activity as interest rates have approached 7%, we anticipate mortgage rates will stabilize later this year in anticipation of the end of the Fed’s tightening cycle,” Danushka Nanayakkara-Skillington, a VP of forecasting at the NAHB said.

Separate data released Wednesday showed mortgage applications rose 1.1% from the prior week on a seasonally-adjusted basis. Bonds, you’ll recall, staged a dramatic rally following CPI and PPI data which suggested inflation in the US may finally be on a sustainable path lower.

“Mortgage rates declined last week, as markets responded positively to incoming data,” MBA chief economist Joel Kan said. “Most rates in our survey declined, with the 30-year fixed rate falling to 6.87%.” That’s a relief. Buyers will take anything they can get with both prices and mortgage payments sitting near record highs+.

Permits and completions both fell in the government release. Tellingly, perhaps, single-family units under construction were down 17% YoY to a two-year low, while the number of apartments under construction continued to increase near the highest in half a century of data. Single-family permits rose to a one-year high, though, while multifamily applications fell the most in seven months.