- U.S. housing starts surged by 22.6% month-on-month to 1.50 million units (annualized) in July. The July print shattered market expectations, which called for a much more staid increase of 5.0% to 1.24 million units. Today’s report also came with revisions to the June and May readings (+61k on net).
- The improvements were broad-based, with both single and multi-family starts coming in higher. Single-family starts rose by 8.2% to 940k units, while the multi-family segment posted an impressive 58.4% gain to 556k units.
- Similarly, permits advanced by 18.8% in July to 1.50 million. Multi-family permits surged by 22.5%, following a 11.1% contraction in the previous month, while single-family permits were up 17.0%.
- The regional outturn was decidedly positive, with gains largest in the Northeast (+35.3%) and the South (+33.2%). By contrast, the West and the Midwest recorded more modest gains, with starts increasing by 5.8% in both regions.
Key Implications
- Impressive! While housing starts were expected to forge ahead in July, it is fair to say that today’s report blew expectations out of the water. The rebound in homebuilding activity has now extended to three consecutive months, bringing starts within 5% of their pre-pandemic levels. On the whole, the housing sector, supported by low mortgage rates and resilient demand from millennial homebuyers, continues to be a bright spot for the American economy and is one of a few sectors showcasing a “V-shaped” recovery (see report).
- The continued strength in housing demand is fueling builder confidence, which has recently matched an all-time high that was last reached in 1988. The outlook for housing construction is not entirely rosy, however. Emerging supply constraints and the slowing pace of recovery in other areas the economy, threaten to put a lid on housing demand growth in the months ahead. In addition, builders are notably faced with a staggering rise in lumber prices, which have soared by 80% since April due to insufficient domestic production and tariffs on Canadian sources.
