U.S. housing starts rise sharply above expectations in July

U.S. housing starts rose sharply by 22.6 percent sequentially to 1.50 million units in July. The data for July succeeded market expectations of a rise of 5 percent to 1.24 million units. Furthermore, the data for June and May readings were revised upwards to a net rise of 61k.

The rebounds were widespread, with both single and multi-family starts coming in higher. Single-family starts rose 8.2 percent to 940k units, while the multi-family segment recorded an impressive 58.4 percent rise to 556k units.

Similarly, permits rose 18.8 percent in July to 1.50 million. Multi-family permits rose sharply by 22.5 percent after an 11.1 percent contraction in the previous month, while single-family permits rose 17 percent.

Region wise, largest gains were seen in the Northeast and the south, which saw a rise of 35.3 percent and 33.2 percent, respectively. On the contrary, the West and the Midwest saw more modest gains, with starts rising 5.8 percent in both regions.

The recovery in homebuilding activity has now extended to three straight months, bringing starts within 5 percent of their pre-pandemic levels. On the whole, the housing sector, underpinned 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, noted TD Economics in a research report.

“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 percent since April due to insufficient domestic production and tariffs on Canadian sources”, added TD Economics.