Single-Family Building Drives Rebound In US Housing Starts

US housing starts rebounded last month after suffering a bad hangover from spring’s binge-building.

At 1.452 million, July’s annual pace of new construction managed to top estimates, albeit not by much. Consensus was 1.45 million.

The 3.9% increase is measured from a lower base. June’s annualized rate was revised down, making that month’s plunge versus May’s bonanza all the more “impressive,” at nearly 12%.

July’s rate, as initially reported anyway, was the second briskest since September.

Earlier this week, the NAHB said builder sentiment declined for the first time this year in August, as high rates dampened the mood. Still, the dearth of resale properties in America suggests demand for new homes will remain robust.

Single-family starts rose nearly 7% to a 983,000 pace. With the exception of May’s building spree, that was the fastest since June of last year.

As the figure shows, single-family construction has recovered after falling from the blistering pace witnessed during the pandemic housing boom. The current rate is well above pre-COVID levels.

Although affordability concerns are still front and center for many would-be buyers, families have little choice but to consider new homes which, all else equal, and notwithstanding incentives, tend to be more expensive. As noted above, you can’t buy what isn’t for sale, and what isn’t for sale are existing homes. New construction has stepped in to fill the void, driving enormous gains for publicly-traded builders.

Notably, single-family permits were the highest in 11 months. Multifamily starts and permits both fell in July.

This is the same story week after week, month after month. Until existing homeowners who might want to sell, but don’t want to give up their rate, can be coaxed from the sidelines, new construction should stay supported. Of course, all bets are off in a recession, but with the Atlanta Fed’s GDPNow model tracking at 5% for Q3, that seems a distant prospect.