- Housing starts increased by 97k units in June to 1,643k (annualized), beating expectations for a modest expansion to 1,590k. Revisions to the prior months’ data subtracted 26k units from the overall tally.
- Single family construction led the way (+69k, +6.3% m/m), while the multifamily segment rose 28k (+6.2% m/m).
- Building permits declined by 85k units to 1,598k (annualized). Permitting in the single family segment decreased by 71k, and was complemented by a pullback in multifamily permit applications (-14k).
- Monthly gains were concentrated in the West (+48k) and South (+78k), while the Northeast (-12k) and Midwest (-17k) recorded moderate declines.
Key Implications
- New housing construction remains healthy with starts and permits in line with post-pandemic highs. Headline starts are above the six-month (1,583k) and 12-month (1,546k) moving averages. The multifamily segment also showed resiliency as the lifting of pandemic-era restrictions in urban centers increased the appeal of urban living.
- Single-family sales have slowed through the early months of 2021, reflecting some softening in demand. Meanwhile, the supply of housing has been slowly recovering with months’ supply of new single-family homes rising since October 2020, and supply of existing homes ticking higher since the turn of the year. There is still some room for improvement on the supply side and the market can certainly absorb additional construction projects in the pipeline without risk of becoming overbuilt.
- With permitting activity slowing, we anticipate some normalization in housing construction in the second half of 2021. Fortunately, newly-falling mortgage rates and the recent declines in lumber prices should help with affordability of new builds, while healthy labor market gains add to the pool of potential buyers.
