While this month's news was upbeat for both payrolls and retail sales, it was not so for today's housing starts/permits release. As seen in the accompanying chart, single-family housing starts dropped in June, and while permits were up, those latter gains merely brought single-family permits back to the level that has been sustained since early-2013. Meanwhile, multi-family measures were down across the board. We're not claiming that homebuilding is weakening, rather, that it is clearly not strengthening. In order for homebuilding to contribute to GDP growth, the levels of housing starts and permits need to be rising. This is not happening. Federal Reserve Chair Janet Yellen said as much in her testimony earlier this week. Where we would disagree with her is in pointing out that this housing torpor has been in place since late-2012, well before the spring-2013 jump in mortgage rates on which she blamed the housing sluggishness. If you examine the innards of the housing data, you find that grassroots homebuyers—owner-occupants as opposed to owner/landlords—have been largely absent throughout this expansion. There is nothing wrong with investor demand driving housing. The problem is that there are not enough potential owner/landlords to drive homebuilding to the level of 1.4 million units per year or better that would be consistent with a full housing market recovery. We need grassroots buyers out in force, and we are all waiting for their return, so far to no avail. In the meantime, homebuilding is likely to languish around recent levels, regardless of how hard policymakers huff and puff. Consistent with our remarks earlier this week, with consumer spending steady at best and housing going nowhere, that sustained 3% GDP growth target is far off, if not unattainable.