The Census Bureau reported a 14.6 percent jump in housing starts in June, its largest monthly increase since January, with new residential construction up from 549,000 in May to 629,000 in June (All rates are in annual terms). This larger-than-expected gain is welcome news to an industry which has struggled for much of the past two years in a narrow range from 500,000 to 600,000. As a sign of future construction, housing permits also rose from 609,000 to 624,000, a gain of 2.5 percent.
The strongest gains in these numbers stemmed from multi-family housing, particularly those with five units or more, with starts up from 135,000 in May to 176,000 in June, or 30.4 percent. Likewise, multi-family housing permits rose 6.9 percent. Single-family construction numbers were also up 9.4 percent and 0.2 percent, respectively. In addition, housing starts were up in all regions of the country, led by strong gains in the Northeast and Midwest. Despite this good news, housing completions declined 1.7 percent from May to June.
This report contrasts with the Housing Market Index released yesterday from the National Association of Home Builders (NAHB) and Wells Fargo. While the HMI rose 2 points, from 13 in June to 15 in July, the overall index remains well below historic norms and (like the comparable Census measures) in the same narrow range for the past few years. It has been a range of 13 to 19 in every month since April 2009, for example, with the exception of May 2010 when the first-time homebuyer tax credit expired.
The Housing Market Index rose largely on increased single-family sales expected over the next six months, with that measure up from 15 in June to 22 in July. The index for potential buyers, though, was unchanged from the previous month. In terms of geography, the HMI rose in every region except for the Northeast.
These two reports – particularly the new figures from the Census Bureau on housing starts and permits – point to some optimism in the housing sector. While it is too early to say if one month’s numbers represent a trend (especially when starts have exceeded 600,000 before only to fall in the next month), we can hope that the rise in new starts and permits bodes well for future construction.
Chad Moutray is chief economist, National Association of Manufacturers.