Homebuilding is on Fire; Best Pace in Over a Decade

Residential construction rates soared in July with both permits and starts increasing from their June pace by double digits and topping 2019 numbers for the same period. Completions also rose, but at a more subdued rate.

The U.S. Census Bureau and Department of Housing and Urban Development said permits were issued during the month at a seasonally adjusted annual rate of 1,495,000, an 18.8 percent gain from June. That June rate was also higher than originally reported, revised from 1,241,000 to 1,258,000. Permitting is now up by 9.4 percent from the same period in 2019.

Permitting was significantly higher than had been forecast - with estimates among analysts polled by Econoday of 1,200,000 to 1,380,000 units. The consensus was 1,300,000.

Single-family permits were issued at the rate of 983,000 compared to a revised (from 834,000) June rate of 840,000 units. This was a 17.0 percent change for the month and 15.5 percent year-over-year. Multifamily permitting jumped 23.5 percent to 467,000 but that number was down 0.4 percent on an annual basis.

On a non-adjusted basis there were 136,400 permits issued during the month, 92,700 for single-family houses. The June authorizations numbered 124,000 and 84,300, respectively.

For the year-to-date (YTD), permits are up 2.2 percent from the first seven months of 2019 at 794,800. Single-family permits are 5.8 percent higher at 526,100 and there have been 244,500 multifamily units authorized, a decline of 4.8 percent.

Housing starts performed even better than permitting, increasing by 22.6 percent from June to a seasonally adjusted annual rate of 1,496,000. The June rate was revised higher, from 1,186,000 to 1,220,000. Starts were 23.4 percent higher than the estimate of 1,212,000 in July 2019.

The numbers again left analysts' predictions in the dust. Starts had been expected to range from 1,169,000 to 1,320,000. The consensus was 1,240,000.

It was, however, multifamily starts that drove the huge July gains. They rose 56.7 percent month-over-month to 547,000 from 349,000 and were 67.8 percent higher than a year earlier. Single-family starts grew by an impressive 8.2 percent as well, to 940,000 from 869,000 (revised from 831,000) and were 7.4 percent ahead of their July 2019 pace.

Starts totaled 139,400 on an unadjusted basis compared to 114,600 in June. Single-family starts rose from 84,900 to 89,300. YTD starts are now at 763,200, 4.7 percent growth from a year earlier. Single-family construction has gained 0.9 percent to 519,100 units and multifamily construction is 14.6 percent higher than during the same period last year at 238,000 units.

Completions were also higher on both a monthly and an annual basis, but with much more modest gains. Units were completed at an annual rate of 1,280,000 units compared to 1,236,000 (revised from 1,225,000) the prior month, a 3.6 percent increase. Completions were up 1.7 percent year-over-year. Single-family completions were down 1.8 percent and 0.4 percent from the two earlier periods at 909,000 units. Completed multifamily units increased by 19.3 percent to 364,000 units, a 9.0 percent annual change.

Actual completions during the month were estimated at 110,900 with single-family units accounting for 75,400. The June numbers were 109,800 and 81,600, respectively. For the first seven months of the year there have been 696,300 units of housing completed, 1.0 percent fewer than during the same period in 2019. Single family completions are up 0.9 percent to 501,400 and 5.4 percent fewer multifamily units have come on line YTD, a total of 190,000.

Mike Fratantoni, chief economist for the Mortgage Bankers Association (MBA) said the following about the residential construction report, "Homebuilders picked up the pace of construction again in July, with both single- and multifamily starts up strongly. This data lines up with both the strong gains in MBA's latest Builder Application Survey, and the substantial increase in builder confidence reported by the NAHB. Homebuyer demand remains robust, inventories are tight, and there is a need for new units to keep the pace of sales going. On another positive note, housing permits were running at an even faster pace in July, indicating that builders will continue to increase production in the months ahead. Housing is certainly one of the bright spots in the struggling economy."

There were 1,181,000 units under construction at the end of July, 503,000 of which were single-family units. An additional 181,000 permits had been authorized under which construction had not yet begun. Single-family permits accounted for 101,000 of the total.

Permits in the Northeast grew 14.8 percent compared to June and were up 6.9 percent for the year. Starts rose 35.3 percent for the month and increased 63.5 percent on an annual basis. The completion rate during the month was 57.7 percent higher than in June and was up 6.7 percent from the previous July.

Permits jumped 23.8 percent and 32.5 percent respectively from June and from the prior July in the Midwest. Starts were 5.8 percent and 15.5 percent higher than the two earlier periods. Completions dropped 26.6 percent from June and 29.6 percent year-over-year.

The South saw permitting increase 13.7 percent from a month earlier and 8.3 percent on an annual basis and starts grew by 33.2 percent and 33.0 percent. Completions edged higher by 1.7 percent and 0.3 percent.

Permitting in the West gained 29.1 percent in one month and was 1.9 percent higher than in July 2019. Starts increased by 5.8 percent but remained 3.1 percent lower than a year earlier. There were 13.2 percent more completions than in June and 24.5 percent more than in July 2019.