The Census Bureau and the U.S. Department of Housing and Urban Development said that new housing starts rose to a three-month high in June, recovering a bit from a springtime lull. New residential construction activity increased from an annualized 1,135,000 in May to 1,189,000 in June. This was not far from 1.2 million units, a threshold that the market seems unable to maintain of late. Nonetheless, I would expect 1.21 million housing units started by year’s end. Indeed, residential construction remains one of the brighter spots in the economy, and builders remain mostly upbeat about the next six months, according to the National Association of Home Builders. With that said, housing starts were off 2.0 percent over the past 12 months, mainly from volatility in the multifamily segment. Single-family starts were more indicative of recent strength, up 13.4 percent year-over-year.
In this report, both single-family (up from 745,000 to 778,000) and multifamily (up from 390,000 to 411,000) starts data were higher in June. New single-family residential construction activity grew at its fastest pace since February, and they continue a slow-but-steady trend higher. Single-family housing starts have averaged 776,333 year-to-date in 2016 through June, up from 675,833 for the same time frame in 2015. At the same time, the multifamily starting pace represented a nine-month high, with these figures experiencing large swings from month-to-month. The year-over-year comparison was skewed by an outsized gain in activity in June 2015 to 527,000 units. If you exclude that outlier, multifamily starts rose from an average of 368,800 through the first 5 months of 2015 to an average of 379,167 in the first half of 2016.
Meanwhile, housing permits increased from 1,136,000 to 1,153,000, a four-month high. Permits were slightly higher for both single-family (up from 731,000 to 738,000) and multifamily (up from 731,000 to 738,000) units. Permits are often a proxy for future activity, and in that light, the gain was somewhat encouraging, even if we might prefer faster growth. Much like the housing starts numbers, the year-over-year data were off sharply, down 13.6 percent from 1,334,000 housing permits in June 2015. The prior year’s permitting rate was skewed by strong multifamily activity, as noted above. Excluding that figure, growth in permits has been essentially unchanged, up from an average of 1,140,400 in the first 5 months of 2015 to 1,141,000 in the first half of 2015.