Data released on Friday shows that housing starts and building permits have dropped to their lowest levels since mid-2020, and lumber prices are responding. …As of yesterday’s close, lumber is down 9.7% over the last month and down 15% since this time last year. Permit issuance dropped 3.8% last month to an annualized pace of 1.38 million, down from 1.44 million in April. Everyone is getting housing wrong now. The interest rate lags are beginning to hit, and housing construction is clearly telling you the impacts are just starting to manifest. …The data isn’t good, which matters for U.S. markets. Lumber is likely to continue its downtrend in response; it is one of the most expensive materials used in a new home, and homebuilder sentiment has a big impact on lumber’s prices. As homebuilding permits and housing starts slump, lumber demand slacks and prices fall — just as we are seeing today.