Home Building Gains Momentum in June
Single-family starts and building permits continue to recover.
Privately owned housing starts in June were at a seasonally adjusted annual rate of 1,186,000, which is 17.3% higher than the revised May rate of 1,011,000 but still 4% lower than the June 2019 rate of 1,235,000, announced the Census Bureau and the Department of Housing and Urban Development jointly Friday.
According to the data, single-family housing starts were at a rate of 831,000 last month, a 17.2% increase above May’s revised figure of 709,000. For units in buildings with five units or more, the June rate was 350,000, an 18.6% increase from the prior month’s figure.
Housing units authorized by building permits in June were at a seasonally adjusted rate of 1,241,000, which is 2.1% above May’s revised rate of 1,216,000 but 2.5% lower than June 2019’s rate of 1,273,000. Single-family authorizations last month were at a rate of 834,000, 11.8% above May’s revised figure of 746,000. For units in buildings with five or more units, authorizations were at a rate of 368,000 last month.
Housing completions in June were at a seasonally adjusted annual rate of 1,225,000, about 4.3% above May’s revised estimate of 1,174,000 and also 5.1% higher than June 2019’s rate of 1,166,000. Single-family housing completions last month were at a rate of 910,000, which is 9.6% above May’s revised rate of 830,000. For units in buildings with five or more units, the June rate was 311,000.
“Today’s new residential construction report from the Census Bureau showed a stronger-than-expected reading for June and upward revisions to May. New housing starts rose 17.3% to an annualized pace of 1.19 million units, driven by increases in both single-family and multifamily construction. With the upward revisions, total starts averaged 1.04 million units in the second quarter, slightly above our July forecast of 1.01 million,” said Doug Duncan, chief economist at Fannie Mae. “The June increase in single-family starts was in line with our expectations, but with the upward revisions to the prior two months, the quarter averaged 740,000 units compared to our forecast of 722,000. Encouragingly, given the disruptions caused by COVID-19, year-to-date single-family and multifamily starts were down only 1.6% and 5%, respectively, from the same period a year ago.”
Duncan said he expects to see continued strength in single-family starts and a leveling off of single-family sales in the third quarter, bringing the ratio more in line with historical norms. “Supporting that forecast, single-family permits jumped by around 12% for the second straight month, suggesting new building has momentum heading into the third quarter,” he said. “Continued strong home purchase demand driven by historically low mortgage rates and tight inventories of existing homes for sale should support near-term single-family construction. A downside risk to our housing starts forecast is building material prices, such as lumber, which have spiked in recent weeks. In early July, the price of lumber reached levels not seen since the surge of 2018.”
First American deputy chief economist Odeta Kushi agreed that home builder optimism has recovered due to the robust demand and that June’s month-over-month rebound in housing permits and starts indicates builders are responding to the need for more homes.“Pent-up demand from a deferred spring home-buying season and historically low mortgages rates have resulted in a strong V-shaped recovery for the housing market, and builders are taking note,” he said. “This is a welcome sign of new inventory to come. More inventory will reduce the pressure from the lack of supply in today’s market.”