Housing starts hit a seasonally adjusted annual rate of 1.19 million units in June, a broad 17.3% jump from May’s revised estimate of 1.01 million.
That’s according to the U.S. Census Bureau and Department of Housing and Urban Development (HUD), which also reported that housing starts are only down 4.0% from last June despite the negative impacts of the coronavirus pandemic. Construction continues to recover after housing starts bottomed out in April to a seasonally adjusted annual rate of 934,000 units, and after permits rebounded in May, it looks like some of those projects are getting under way.
Zillow economist Matthew Speakman said that new-home construction is benefiting from growing sentiment from builders optimistic that encouraging market conditions will entice sustainable activity from buyers.
“Homebuilder confidence has more than doubled in the last three months, indicating that builders are shedding any concerns associated with rising materials costs and land shortages, and diving right into a market that they believe will see enduring demand from would-be buyers, thanks in part to record-low mortgage rates and changing buyer preferences,” he said. “Today’s data highlights this changing sentiment, and this momentum for home construction should continue.”
Single-family housing starts came in at a rate of 831,000 in June, 17.2% above May’s revised figure of 709,000. June’s figure is down 3.9% year over year, though it’s better than numbers forecast a few months ago, according to Robert Dietz, chief economist for the National Association of Home Builders (NAHB).
Year-to-date, single-family starts are remarkably down just 1.3% compared to 2019. Challenges in the sector, however, do persist. There were just 497,000 single-family homes under construction in June, down nearly 5% year over year and lowest since fall 2017. This reflects a couple of months of declining starts since the onset of the pandemic.
On the multifamily side, the start pace for units in buildings with five units or more was 350,000 in June. While that’s down 43% from January’s sturdy multifamily pace, Dietz noted that “NAHB’s forecast calls for multifamily construction to decline more than single-family construction as a result of the 2020 downturn, so these numbers are well above forecast.”
Permits in June came in at a seasonally adjusted annual rate of 1.24 million, 2.1% above May’s revised rate of 1.22 million. Permits continue to rise following last month’s surge, driven by an 11.8% month-over-month gain in single-family permits. As with last month, growth in permitting could portend growth in starts for the months ahead.
Year to date, single-family permits are 3.4% higher in 2020 than last year, although single-family construction in 2019 endured a weak start to the year.
Permits for units in buildings with five units or more, however, took a step back, coming in at a rate of 368,000 in June. That’s down 14.0% from May’s rate of 428,000.
June completions were at a rate of 1.23 million, up 4.3% from May’s revised estimate and 5.1% from June 2019. Single-family completions are up 9.6% monthly, while completions of units in buildings with at least five units are down 5.5%.
All in all, June’s construction data offers positives both in the near- and long-term, though as Speakman observed, the situation remains fluid.
“Several looming risks remain that could thwart this improved outlook – such as the rising coronavirus case counts across the country and an unemployment situation that appears to be becoming more permanent,” he said. “Both of these factors, as well as many others, pose considerable risks for the industry and the coming months will be telling to see how much impact they have on what is otherwise a rosy outlook for the new construction industry.”