In the lull after the tax credit, builders are sitting on the sidelines.

According to numbers released Tuesday by the U.S. Census Bureau, overall housing starts tumbled 5% in June to a seasonally adjusted pace of 549,000. This represents the lowest level of building in eight months, according to Patrick Newport, a U.S. economist at IHS Global Insight, a research firm in Lexington, Mass. Year-over-year, total June starts were off 5.8%.

Single-family starts were essentially flat with a 0.7% dip to a seasonally adjusted level of 454,000. That’s down 4.6% compared to last June.

Total building permits did increase by 2.1% to a seasonally adjusted level of 586,000, but that was primarily due to strong multifamily numbers. “Multifamily permits jumped 19.6% to a 165,000 [unit] pace, the highest reading in 16 months,” said Newport, who also noted a 21.5% drop in multifamily starts in June, to a seasonally adjusted level of 95,000. “In our view, the permits numbers offer a better reading on the state of the multi-family housing market. Recent numbers indicate that this market has stabilized, but at historically low levels.”

Overall permits were down 2.3% compared to last year.

The all-important single-family permits number showed persistent weakness in June, falling 3.4% to a 421,000-unit level. That level of activity is 6.7% lower than it was during the same month one year ago.

This statistic “matters more than others because it is well estimated, is not affected much by weather, and it is a leading indicator for single-family starts over the next two months,” explained Newport, who suggested that June’s declines will continue for now. “Single-family permits slipped for the third straight month in June, falling to their lowest level since April 2009. The drop is probably all related to the second home buyer's tax credit, which stimulated new construction early this year. The drop implies that single-family housing starts will drop again in July.”

Carl Reichardt, a senior equity research analyst with Wells Fargo Securities in San Francisco, expressed a similarly glum view of the current housing market after today’s numbers were released.
“June housing starts and building permit data further highlight the pull-forward of demand by the federal housing credit and the subsequent decline in demand for new housing units,” he said in a research note. “Further, June completions were the highest they have been since December 2008 as builders rushed to finish homes in time for the June 30 deadline for closings (which has since been extended through September 30, 2010). With lackluster demand for new housing, despite record-low mortgage rates, we see few catalysts to improve sentiment or share prices.”

Alison Rice is senior editor, online, at BUILDER magazine.