Housing starts may have peaked this year

Housing starts reached an annualised 197,000 units in June, up from a revised 194,000 in the month before. Housing starts this high are arguably well above estimates of demographic requirements, which we figure is around 175,000. This view is broadly consistent with the accumulation of newly completed unoccupied housing units, which is one sign of overbuilding. Considering that the gap between recent building permits and housing starts is now closed, if not negative, we think housing starts may have peaked this year.