The Census Bureau and the Department of Housing and Urban Development reported that new housing starts rebounded in June after a soft spring. New residential construction rose from an annualized 1,122,000 units in May, an eight-month low, to 1,215,000 in June. Since reaching 1,288,000 units in February, housing starts have pulled back; however, on the positive side, this is the first time activity has exceeded 1.2 million since then, which is encouraging. Homebuilder optimism remains strong despite slipping once again, with respondents to that survey predicting healthy gains in activity over the next six months (see below). I am forecasting growth of 1.28 million starts by year’s end.
Looking at the June data, single-family (up from 799,000 to 849,000) and multifamily (up from 323,000 to 366,000) starts increased in the month, with both at their fastest rate since February, mirroring the headline number. The Midwest and Northeast saw the strongest growth, with only marginal gains in the West, whereas activity slipped in the South. On a year-over-year basis, housing starts rose 2.1 percent from June 2016’s pace of 1,190,000. Single-family starts have jumped 10.3 percent over the past 12 months, up from 770,000 one year ago. In contrast, multifamily starts, which can be highly volatile from month to month, have fallen 12.9 percent over that time frame.
Meanwhile, housing permits also increased strongly, up 7.4 percent from 1,168,000 units at the annual rate in May to 1,254,000 in June. It was the best reading since March. Permits have now exceeded 1.2 million units in 10 of the past 11 months. Permits are a proxy of future activity, so the data suggest strong growth moving forward. Much like above, single-family (up from 779,000 to 811,000) and multifamily (up from 389,000 to 443,000) permitting rose in this release. Overall, new residential construction permits have increased 5.1 percent since June 2016, up from 1,193,000 units last year. Nonetheless, single-family permits grew 9.2 percent year-over-year, with multifamily activity down 1.6 percent.