Home construction surges in July
Housing starts, applications seen as reflection of demand
WASHINGTON — U.S. home construction starts increased in July by more than forecast and applications to build surged by the most in 30 years, indicating builders are responding to robust housing demand fueled by record-low interest rates.
Construction of new homes surged 22.6% last month as homebuilders bounced back from a lull induced by the coronavirus pandemic.
The Commerce Department reported Tuesday that new homes were started at an annual pace of nearly 1.5 million in July, the highest since February and well above what economists were expecting. Housing starts have now risen threestraight months after plunging in March and April as the virus outbreak paralyzed the American economy. Last month’s pace of construction was 23.4% above that of July 2019.
“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, wrote in a research note. Strong demand and limited supply drove builders to break ground.
The big gains came from the construction of apartments and condominiums, which soared 56.7% with an annualized rate of 556,000. But single-family home construction ticked up, too, by 8.2%, with a rate of 940,000.
Construction rose all over — 35.3% in the Northeast, 33.2% in the South, and 5.8% in both the Midwest and the West.
Applications for building permits, a good indication
of future activity, jumped 18.8% from June to an annual rate of 1.5 million, the highest number since January and up 9.4% from July 2019.
The 18.8% increase in permit applications was the biggest jump since January 1990.
Single-family permits increased 17% to a rate of 983,000, the strongest since February. The number of residential projects authorized but not yet started also advanced — to 101,000 in July, the biggest backlog since the end of 2018.
The National Association of Home Builders reported Monday that builders’ confidence this month matched the record high first reached in December 1998.
“Strong demand and a record level of home builder confidence will support housing starts in the second half of 2020,” economists Nancy Vanden Houten and Gregory Daco of Oxford Economics wrote.
But they warned that Congress’ failure to approve another rescue package could take a toll on the economy. “The still-widespread coronavirus and an economy struggling to recover without fiscal support may limit the upside” for the housing industry, they wrote.
The resilient housing market and stronger home improvement spending were evident in Home Depot Inc.’s latest results. The retailer reported sales growth that was double expectations, prompting Chief Executive Officer Craig Menear to call the performance “recordbreaking.”
At the same time, builders may face some head winds in the coming months as building costs increase. Lumber prices are at the highest on record and may keep climbing given that millions of tiny beetles are destroying the world’s timber supplies. The beetles have already destroyed 15 years of log supplies in British Columbia, enough trees to build 9 million singlefamily homes.