Residential Construction Shows Growth in June
This spring, the coronavirus drove construction activity to a standstill across the country. Has the economic recovery begun?
Despite the ongoing economic turbulence from the coronavirus pandemic, housing and construction in the United States continue to bounce back from low early year numbers. The latest data from the US Census Bureau shows single family housing starts and permits increased significantly from May to June, an encouraging sign that builders and construction pros are slowly but surely getting back to work. Single-family starts rose 17.2 percent and permits 11.8 percent.
“Fueled in part by record low mortgage rates, builders are seeing solid demand for housing despite the challenges of the virus and elevated unemployment,” said Chuck Fowke, chairman of the National Association of Home Builders. “Demand is growing in lower density markets, including exurbs and small metros.”
Thanks to this quick rebound, the number of permits issued for single family housing in the first six months of 2020 was actually 3.4 percent higher than the first six months of 2019. Year to date, single-family starts are only down 1.3 percent compared to that same time frame in 2019.
There were 497,000 single family homes under construction in June, which is the lowest total for any month since 2017.
“Single-family construction is expanding off April lows due to lean inventories of new and existing homes,” said NAHB Chief Economist Robert Dietz. “However, builders face challenges in growing costs, particularly rising prices for lumber.”
Even given those challenges, the NAHB’s Housing Market Index, a reflection of builder confidence in the single family housing market, has also rebounded significantly. (The HMI can range from 0 to 100.) In April, the HMI dropped from 72 to 30 as the coronavirus shut down jobsites and created general uncertainty around the industry. But by early July the HMI shot back up to a score of 72.
“Builders in the Northeast and the Midwest are benefiting from demand that was sidelined during lockdowns in the spring,” said Fowke. “Low interest rates are also fueling demand, and we expect housing to lead an overall economic recovery.”