Housing Construction Activity Strengthens in June

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The rate of housing starts in June ROSE 8.3 percent to a seasonally adjusted 1.215 million unit — the fastest pace since February;
  • The rate of starts for both single- and multi-family homes improved: single-family starts ROSE 6.3 percent and multi-family starts were up 13.3 percent;
  • All housing permits ROSE 5.4 percent in June, the number of single family permits was up 4.1 percent and the number of multi-family permits increased 13.9 percent from June;
  • The rate of home completions ROSE 5.2 percent from June with improvements for both single- and multi-family completions.

Image result for housing construction

With the advent of weather, housing construction activity spurted in June with the rate of both starts and permits (not dependent on weather) improving, the Census Bureau and Department of Housing and Urban Development reported Wednesday. The government report came on the heels of a decline in builder confidence in July (a measurement taken in the first 10 days of the month) according to the Housing Market Index (HMI) of the National Association of Home Builders.

Change since May 2017

Permits Starts Completions
Total      ↑
Single-Family      ↑
Multi-Family      ↑

 

 

 

 

The Bureau of Labor Statistics earlier this month reported the number of residential jobs, including specialty trade contractors, increased by 6,000 in June.

All three components of the HMI components fell July. The components gauging current sales conditions dropped two points to 70 while the index charting sales expectations in the next six months dropped two points to 73. At the same time, the component measuring buyer traffic slipped one point to 48.  Any number over 50 indicates that more builders view conditions as good than poor

The government data suggested better times ahead for the housing construction sector. The sales market for new (and existing) homes received a boost with a report student loan borrowers may be off the hook for billions of dollars of loan obligations because of paperwork snafus. Student loan obligations have been a speed bump for would-be buyers.

Mortgage interest rates moved up at the beginning of July to their highest levels in more than two months which could spark a buying spree among those who want to lock in rates before they go still higher as a consequence of the Federal Open Market Committee’s action raising the benchmark federal funds rate last month.

While the housing construction report was generally good, it showed a shift to multi- versus single-family building. Sing-family permits represented 64.7 percent of all permits issued in June, down from 66.7 percent in May. At 64.7 percent, the single-family share of permits matched April for the second lowest share this year. The single-family share is still higher than it was in 2016 when it averaged 62.4 percent of all permits.

Home building activity is not an isolated economic statistic. In addition to directly influencing construction sector employment, it has an impact on retail sales of appliances, furniture and other household decorating items.

The homebuilder confidence could have been affected by the increase in the “gap” between new home completions and sales in May (the last month for which both data sets are available). According to Census and HUD reports for completions and sales, builders finished 185,000 more new homes than were sold in May. In April, sales exceeded completions by 181,000.

Hear Mark Lieberman every Friday at 6:20 am on POTUS Morning Briefing, Sirius-XM 124. You can follow him on Twitter at @foxeconomics. .m

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