- U.S. housing starts increased by 17.3% month-on-month to 1.19 million units (annualized) in June. The June print came slightly below market expectations, which called for a 22.2% increase. Today’s release also came with revisions to the May 2020 reading (+37k).
- The improvement was broad-based and spanned all segments of the market, with multi-family starts rising by 17.5% to 355k units, while single-family starts advanced by 17.2% to 831k units.
- By contrast, building permits rose by a much more modest 2.1% to 1.24 million. The increase was concentrated in single-family permits, which surged by 11.8%, while permits in the more volatile multi-family segment declined by 13.4% following a 17.5% jump in the month prior.
- The regional outturn was generally positive, with starts improving in all major regions but the West (-7.5%). The Northeast (114.3%) spearheaded the increase, followed by the Midwest (29.3%) and the South (20.2%).
Key Implications
- Following a steep contraction in March and April, housing starts have improved for two consecutive months and are now sitting at about 24% below their pre-crisis levels. While today’s report was weaker than the consensus forecast, it is still a solid turnaround in construction activity. On the whole, the housing sector is showcasing a recovery that appears to be stronger than other areas of the economy.
- Such optimism also came through in builder sentiment, which has virtually recovered to its pre-crisis levels. Indeed, homebuilders are betting on continued strength in housing demand, especially within millennials looking to take advantage of mortgage rates at record lows. A noteworthy development, the average 30-year fixed mortgage rate recently dropped below the 3% mark.
- While recent housing data have been encouraging, significant downside risks remain. The surge in new coronavirus cases has already prompted a number of states to roll-back or suspend reopening plans and, in some instances, reintroduce restrictive measures on business activity. Thus far, these measures are limited to specific industries, including food and personal care services. However, a continued rise in infections could ultimately result in a broader setback and spill over to other areas of the economy.
