New home construction continued to recover from April’s five-year low in June as privately-owned housing starts jumped 17.3% from May at a seasonally adjusted annual rate of 1.19 million units, according to a report by the U.S Census Bureau.
Despite economic disturbances caused by the COVID-19 pandemic, housing starts only fell 4% below the June 2019 rate. Single-family starts gained 17.2% month-over-month and the rate for multifamily units last month was 350,000.
“A downside risk to the housing starts forecast is building material prices, such as lumber, which have spiked in recent weeks. In early July, the price of lumber reached levels not seen since the surge of 2018,” said Doug Duncan, chief economist at Fannie Mae.
As construction jobs continue to rebound and the housing industry attempts to keep up with increased demand, privately-owned housing units authorized by building permits rose 2.1% above May with an annual rate of 1.24 million units, the report said.
June’s single-family authorizations were at 834,000 units and 11.8% higher month-over-month. However, multi-family building permits were at a rate of 368,000 in June – down from the 434,000 in May.
“Continued strong home purchase demand driven by historically low mortgage rates and tight inventories of existing homes for sale should support near-term single-family construction,” Duncan said.
Privately owned housing completions in June were 4.3% higher than the previous month at a seasonally adjusted rate of 1.23 million, and 5.1% above the June 2019 rate of 1.17 million.
The Housing Market Index, a collaborative survey by the National Association of Home Builders and Wells Fargo, revealed builder confidence in the market for newly built single-family homes jumped 21 points to a score of 58 in June. According to the survey, any reading above 50 indicates a positive market.
“Housing clearly shows signs of momentum as challenges and opportunities exist in the single-family market,” said Robert Dietz, chief economist of the NAHB. “Builders report increasing demand for families seeking single-family homes in inner and outer suburbs that feature lower density neighborhoods. At the same time, elevated unemployment and the risk of new, local virus outbreaks remain a risk to the housing market.”
