US Housing Starts Fall in June: Home Depot and Lowe's Stocks in Focus

What the June Housing Starts Report Changed

Single-family housing starts and building permits both declined in June, the latest sign that elevated mortgage rates and stretched affordability are keeping a lid on new home construction. Housing starts measure how many new homes builders broke ground on during the month, and permits are a forward-looking gauge of how much construction is in the pipeline. Both slipping in the same month points to builders pulling back rather than just a one-month blip in a single data series.

Why Home Depot and Lowe's Stocks Are in Focus

New home construction is one of the biggest demand drivers for home improvement retailers. Every new house that breaks ground eventually needs lumber, fixtures, appliances, and finishing materials, much of it purchased through the professional contractor channels that Home Depot and Lowe's both compete hard to serve. When housing starts slow, that pipeline of future purchases shrinks a few months out, even before it shows up in same-store sales. It adds to an already soft setup for the sector, since existing homeowners have also been renovating less as mortgage rates keep many of them locked into their current homes rather than moving and remodeling.

Which Stocks, and Why

Home Depot and Lowe's both see an indirect, modest drag from this data. Neither company is named in the report, but both are exposed to housing-cycle demand through their professional and DIY customer base. The effect on any single month's results is limited since these retailers sell far more repair, maintenance, and small renovation products than new-construction materials, and existing home sales and remodeling activity matter more to their base business than new housing starts alone. Still, a soft starts print adds to the broader picture of a housing market that is not providing much tailwind for either retailer right now.

What to Watch

The next data points to watch are the following month's housing starts and permits figures, along with the National Association of Home Builders sentiment index, which tends to lead actual construction activity by a month or two. Mortgage rate moves matter as well, since a meaningful drop in rates would likely do more to revive both new construction and remodeling demand than any other single factor investors can watch.