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July Housing Starts Surpass Economists' Estimate 09-01-16 | News

July Housing Starts Surpass Economists' Estimate
Strong Gains Registered in Back-to-Back Months

The consensus estimate was that housing starts would drop in July, compared to June. Instead, it shot 2.1% higher. Starts also jumped in June by 5.1%, according to the Wells Fargo Economics Group.

Housing starts were much higher than economists had expected in July, compared to June, driven largely by the multifamily sector. Completions and building permit activity both declined month-over-month.

The 1,211,000 privately owned housing starts are 2.1 percent above June's 1,186,000 units, the U.S. Census Bureau said in its July new residential construction report. This pace is also 5.6 percent above the same month in 2015.

Single-family homes accounted for 770,000 units, a 0.5 percent hike over the 766,000 units in June, and 1.3 percent higher year-over-year, the Census Bureau report shows. The multifamily sector accounted for 433,000 units, a hike of 8.3 percent month-over-month, and a 15.2 percent jump compared to July 2015.

"July housing starts far surpassed expectations, as economists surveyed by MarketWatch predicted starts would slightly dip to a 1.18 million rate," the website Construction Dive said. "July's housing starts figure represents the strongest month since February."

The housing starts report comes one day after the National Association of Home Builders/Wells Fargo Housing Market Index found that builder confidence rose two points in August to a score of 60.

"After spiking 5.1 percent in June, housing starts rose 2.1 percent in July, well exceeding the consensus forecast," the Wells Fargo Economics Group said.

"New household formations are upping the demand for rental housing, which in turn is spurring the growth of multifamily production," said Ed Brady, chairman of the National Association of Home Builders. "Meanwhile, single-family housing continues to hold firm."

"Single-family starts, on a year-to-date basis, are up 10.6 percent and builders are cautiously optimistic about market conditions," said Robert Dietz, chief economist for the NAHB. "However, the permit trends indicate that supply-side headwinds, such as shortages of lots and labor, continue to affect the housing sector."

There were 1,026,000 housing completions in July, a drop of 8.3 percent compared to June's 1,119,000 units, but 3.2 percent above the pace in July 2015.

Single-family completions came in at 743,000 units, 0.4 percent below the June rate of 746,000 units, although it is 16.3 percent higher compared to July 2015. Multifamily completions were down 24.5 percent versus June, and have dropped 20.1 percent since a year ago.

There were 1,152,000 building permits issued in July, a decline of 0.1 percent compared to the 1,153,000 units in June, but an improvement of 0.9 percent year-over-year.

Single-family homes accounted for 711,000 of those permits, 3.7 percent below June, and 2.4 percent higher year-over-year. The 411,000 multifamily permits represent a hike of 6.7 percent versus June, and a decline of 1.7 percent since July 2015.

Taken together, the new residential construction report and the Housing Market Index "echo expert predictions of a slow but steady housing recovery, as the market continues to claw its way back to normal levels after the devastating crash and recession," Construction Dive said. "Despite concerns of regulatory costs, lack of available land, and a tight labor pool, builders seem to be slowly coming around to the idea of ramping up new construction to meet booming demand."