Photo: James Bombales
After plunging a record 30.2 percent in April, privately-owned housing starts rebounded in June to a seasonally adjusted annual rate of 1.19 million units, according to the latest US Census Bureau data. That’s a 17.3 percent increase over May’s estimated total, but still 4 percent below the 1.26 million units that kicked off construction in June 2019.
Building permits were issued for more than 1.24 million privately-owned housing units on a seasonally adjusted basis, representing a 2.1 percent uptick from May but a 2.5 percent decline compared to the same period last year.
There were 834,000 permits granted for single-family homes, an 11.8 percent month-over-month boost, “suggesting new building has momentum heading into the third quarter,” said Doug Duncan, chief economist at Fannie Mae. Meanwhile, permits for buildings with five or more units equated to 368,000 in June.
Both single-family and multifamily construction showed signs of progress last month. Privately-owned housing completions were up 4.3 percent over May estimates at a seasonally adjusted annual rate of 1.23 million units. Completions for single-family homes amounted to 910,000 units — 9.6 percent more than in May — while those for multi-family properties clocked in at 311,000.
“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,” noted Duncan.
A recent report from John Burns Real Estate Consulting supports this theory, suggesting that new home sales surged 55 percent year-over-year in June, an increase not seen since the height of the housing bubble in 2005.
However, the outlook is not entirely rosy for the new construction home market.
“A downside risk to our housing starts forecast is building material prices, such as lumber, which have spiked in recent weeks,” warned Duncan.
Global supply chain disruptions caused raw material prices to climb 2.2 percent last month, according to a new report from the Associated Builders and Contractors (ABC). The price of softwood lumber skyrocketed 19 percent year-over-year and 11 percent from May to June.
These costs are expected to continue rising as the pandemic wears on in the United States and around the world.