The Census Bureau and the U.S. Department of Housing and Urban Development said that new housing starts and permits each rose sharply in June. New housing starts increased from 1,069,000 units at the annual rate in May to 1,174,000 in June. This was the fastest pace of housing starts growth since November 2007, the month preceding the start of the Great Recession. This was stronger than the consensus estimate of roughly 1.1 million starts for the month, and it was an encouraging sign that the market has gained some momentum after the springtime lull in activity seen earlier in the year.
With that said, the increase in June stemmed largely from the highly-volatile multi-family segment, with single-family starts declining slightly for the month. Multi-family housing starts jumped 29.4 percent from an annualized 378,000 units in May to 489,000 units in June, its highest level since February 2000. This is likely to pull back somewhat in the next month, as it perhaps overshoots the trend line. Yet, it represents movement in the right direction nonetheless. At the same time, single-family starts edged down from 691,000 to 685,000 units, falling for the second straight month from the more-robust pace of 735,000 units in April. The longer-term trend, however, remains positive, up 14.7 percent from 597,000 units in June 2014.
Meanwhile, housing permits were also up significantly in June, foreshadowing healthy gains in the months ahead. Indeed, permits have risen from an annualized 1,038,000 in March to 1,140,000 in April to 1,250,000 in May to 1,343,000 in June. The most recent number represented an 8-year high, being the fastest rate of permitting since July 2007. Still, much like the starts data, the bulk of the recent gains in permits have come from multi-family activity, up from 396,000 in March to 656,000 in June. At the same time, single-family permitting growth has increased at a more-incremental pace, up from 642,000 in March to 687,000 in June. The multi-family numbers are likely to come back to Earth at some point, stabilizing before moving higher again. Overall, though, this report is an extremely positive one for those manufacturers who have long sought a recovery in the housing market.
In many ways, it mirrors the encouraging Housing Market Index from the National Association of Home Builders and Wells Fargo released yesterday. That measure of home builder confidence rose to its highest level since November 2005, with builders mostly upbeat about single-family sales for the next six months.
Chad Moutray is the chief economist, National Association of Manufacturers.