July Housing Surges for Third Month in a Row
The housing industry is getting back to work following hard times earlier in the year. But will it last?
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According to the latest data from the U.S. Census Bureau, housing starts surged forward again in July, posting increases in almost every category for the third consecutive month. Single-family housing starts in July came in at a seasonally adjusted annual rate of 940,000, an 8.2 percent increase from June. Overall, privately-owned housing starts were up 22 percent month-over-month.
“U.S. housing starts blew the roof off of expectations in July … these are the kind of gains seen after storms/hurricanes,” Jennifer Lee, senior economist at BMO Capital Markets, told the Associated Press.
July’s spike in residential housing starts is the largest since October 2016. The annual rate of 940,000 single-family starts is the highest since the coronavirus pandemic caused an economic slowdown and project shutdowns across the country in February.
“The market is being buoyed by historically low interest rates, a focus on the importance of housing and a shift to the suburbs as more buyers are seeking homes in suburban communities, exurbs and more affordable low density markets,” said Robert Dietz, chief economist for the National Association of Home Builders (NAHB).
Applications for housing permits were also up 18 percent in July. The July residential construction report strongly indicates that the housing industry remains a bright spot during this period of economic recovery, and it looks poised to continue as long as demand stays consistent.
“Strong demand and a record level of homebuilder confidence will support housing starts in the second half of 2020, but the still-widespread coronavirus and an economy struggling to recover without fiscal support may limit the upside,” Oxford Economics economists wrote in a note to Reuters.
One other factor that might restrict housing’s growth is the recent rise in construction materials prices. Lumber prices have increased 80 percent since mid-April, exponentially increasing the materials cost for each new home.
“Strong builder confidence and heavy buyer traffic point to further production gains in the near term, but the more than 110 percent jump in lumber prices since mid-April is adding approximately $14,000 to the cost of each new single-family home,” said Chuck Fowke, the NAHB chairman.