The Census Bureau and the U.S. Department of Housing and Urban Development reported that housing starts rose 6.9 percent in June to its highest level since October 2008. New residential construction jumped from an annualized 711,000 units in May to 760,000 in June. Gains were seen in both single-family and multi-family homes, which are now at 539,000 and 221,000 units respectively. The largest increase was among the multi-family units, up 12.8 percent for the month. Of course, some of this gain could be called a correction for declines in the multi-family sector the previous month.
The level of new single-family construction is at its highest point in two years, when activity was artificially lifted due to the first-time homebuyer tax credit. This suggests that the housing market is making slow-but-steady improvements, even as overall numbers remain well-below their levels prior to the housing bubble bursting.
Meanwhile, housing permits dropped from 784,000 to 755,000 units. You could interpret this in two ways. First, since permitting is a leading indicator of future activity, you might say that this could put a damper on future activity, potentially alluding to some softness in the coming months. The drop was most pervasive among multi-family units, which have been quite volatile lately.
This leads to a second interpretation. Single-family permitting rose 0.6 permit in June. Therefore, you could also say that June’s permit number was a correction for the large gains of May, especially with volatility among multi-family housing permits. For instance, in the last four months, multi-family permitting was up 32.3 percent in March, down 18.2 percent in April, up 18.5 percent in May, and then down 10.9 percent in June. The larger trend has been positive, albeit choppy. Housing permits in June 2011 were 633,000.
This mostly upbeat assessment is shared by the National Association of Home Builders (NAHB) and Wells Fargo. Their Housing Market Index, which was released yesterday, was up 6 points from 29 in June to 35 in July. This is the highest point since March 2007, showing that the housing market is suddenly showing some signs of strength even as its overall levels are sub-par.
Gains were seen in every region of the country, and the outlook for future activity was also bright. The index for single-family sales over the next six months rose from 33 to 44, with the traffic of potential buyers also higher (from 29 to 33).
Chad Moutray is chief economist, National Association of Manufacturers.