This morning’s surprising data is explained by Mark Kennedy at CIBC, posted here with his permission:

• US housing starts for June came in weaker than expected at 836k vs 950k expected. May numbers were revised slightly higher from 914k to 928k. Permits also weaker than expected at 911k vs 990k expected. May permit numbers also revised slightly higher from 974k to 985k.
• June weakness almost all attributable to multi family sector where starts fell 26.2% in June after being up 28.2% in May
• Single family starts in June were at 591k, only 0.8% below May numbers of 596k. Single-family permits in June were at 624k about 0.6% higher than May at 620k. Given where the HMI readings were yesterday – single family starts should be closer to 1MM starts – so we should see strengthening here going forward.
• While June housing starts were weaker than expected, this is primarily due to the volatile multi-family component, wet weather also likely played a role. However this does not change our underlying thesis of a gradually improving US housing market. We have expected starts this year to be 950k and remain comfortable with this estimate.