June housing starts were significantly below expectations (836K vs. 960K). Brian Wesbury argues that it was most likely due to weather: "18 states in the South and East had rain totals in June that ranked among their 10 wettest on record." He adds that "The vast majority of the decline (95%) was due to the very volatile multi-family sector." As the chart below shows, this series is notoriously volatile.
With homebuilders' confidence up significantly, and with building permits in June (see chart below) running above starts (911K vs. 836K), it is reasonable to think that the recent decline in starts will reverse. In any event, it remains that case that starts are up over 10% in the past 12 months, and have they have surged 56% in the past three years.
It's possible that the recent rise in mortgage rates, which began in May, could be responsible for some of the decline in June starts. But it would be premature to conclude that the housing market recovery has come to an end -- this is more likely just a pause.
New mortgage applications for home purchases have only declined marginally since mortgage rates started rising, suggesting that underlying demand for housing remains relatively strong.