Housing construction bounced back in June

Housing construction popped back to life in June after a three straight months of declines, reaching the fastest pace since February.

Housing starts increased 8.3 percent last month to a seasonally adjusted annual rate of 1.22 million units, the Commerce Department said Wednesday.

{mosads}Single-family building rose 6.3 percent to a seasonally adjusted annual rate of 849,000 units, the second-highest rate this year, from May’s 799,000.

June’s report showed that multi-family construction, like apartment buildings, jumped 13.3 percent to 366,000. 

“We expect to see continued strength in starts, particularly with single family, as builders seek to capitalize on strong demand in the market coupled with a shortage of housing supply,” said Scott Volling, a partner with PwC.

Volling said affordability concerns are lingering, especially among first-time home buyers, as rising materials costs drive up median home prices. 

The National Association of Home Builders (NAHB) said Tuesday that confidence slipped to 64 in July over those increasing costs, especially for lumber.

Still, the market is showing signs of strengthening despite continued headwinds. 

“The gradual growth in single-family starts in 2017 is in line with our forecast, and we should see this sector continue to strengthen throughout the year as consumers show interest in the housing market,” said Robert Dietz, NAHB’s chief economist. 

Regionally in June, combined single- and multi-family housing production rose 83.7 percent in the Northeast, 22 percent in the Midwest and 1.6 percent in the West.

Starts fell 3.8 percent in the South.

Permits were up 7.4 percent to a seasonally adjusted annual rate of 1.25 million units in June, the best showing since March.

Single-family permits increased 4.1 percent to 811,000 units while multi-family permits jumped 13.9 percent to 443,000.

Regionally, overall permits rose 19.7 percent in the Midwest, 9.9 percent in the West and 6.9 percent in the South. Permits fell 13.9 percent in the Northeast.

Gus Faucher, chief economist at PNC Financial Services Group, said “after a few soft months, housing starts and permits both bounced back in June.”

“The first quarter was strong for homebuilding because of unseasonably warm weather that allowed projects to get started earlier than usual, but that weighed on construction in the spring,” Gaucher said.

“Now it appears that homebuilding is responding to stronger demand, in particular for single-family homes,” he said.

Gaucher said building would be even stronger were it not for shortages of skilled construction workers and a lack of developable land in some parts of the country.

PNC is forecasting total housing starts of 1.221 million this year, up 3.7 percent from 2016.