Housing starts in June dropped 12.3% from May and 4.2% from a year earlier to a seasonally adjusted annual rate of 1,173,000, the Commerce Department reported Wednesday. Analysts were expecting a pace of 1.32 million.

Single-family housing starts dropped 9.1% from May to a rate of 858,000.

Building permits also were down in June, falling 2.2% from May and 3% year-over-year to a seasonally adjusted annual rate of 1,273,000. Single-family authorizations in June were at a rate of 850,000, 0.8% above the revised May figure of 843,000.

Housing completions in June were flat with May at a seasonally adjusted annual rate of 1,261,000, 2.2% ahead of June, 2017. Single-family housing completions in June were at a rate of 862,000, 2.3% below the revised May rate of 882,000.

“New single-family building permits, which are the leading indicator of construction of new homes, rose by 4.6 percent in June – the 2nd lowest growth rate in 2018," said Freddie Mac Chief Economist Sam Khater. "There’s been a noticeable slowdown in single-family permit activity this year, and especially the last four months, which have had two of the three lowest readings over the last three years.

Khater continued, "It’s alarming that the single-family construction permit growth is decelerating at a time when homeownership is rising and millennials are reaching their peak age to really enter the market and buy their first home. The growing imbalance between demand and supply is the reason home prices continue to escalate.”