Driven by Multifamily Construction, U.S. Housing Starts Up 2.1 Percent in July

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According to the U.S. Department of Housing and Urban Development and the Commerce Department, nationwide housing starts rose 2.1 percent in July to a seasonally adjusted annual rate of 1.21 million units. This is the highest reading since February 2016.
 
Multifamily housing was up 5 percent to a seasonally adjusted annual rate of 441,000 units in July while single-family production edged up 0.5 percent to 770,000 units.

"New household formations are upping the demand for rental housing, which in turn is spurring the growth of multifamily production," said NAHB Chairman Ed Brady. "Meanwhile, single-family housing continues to hold firm."

"Single-family starts, on a year-to-date basis, are up 10.6 percent and builders are cautiously optimistic about market conditions," said NAHB Chief Economist Robert Dietz. "However, the permit trends indicate that supply-side headwinds, such as shortages of lots and labor, continue to affect the housing sector."

Regionally in July, combined single- and multifamily starts increased in the Northeast, Midwest and South, with respective gains of 15.5 percent, 2.3 percent and 3.5 percent. The West registered a 5.9 percent loss.

Overall permit issuance inched down 0.1 percent to a seasonally adjusted annual rate of 1.15 million. Multifamily permits increased 6.3 percent to a rate of 441,000, while single-family permits fell 3.7 percent to 711,000.

Permit issuance increased 10.5 percent in the Midwest and 2.6 percent in the South. Meanwhile, the West and Northeast posted respective losses of 8 percent and 10.2 percent.
 
According to Realtor.com Chief Economist Jonathan Smoke, "New construction is failing to keep up with household formation, meaning that the low vacancies in rentals and the tight supply of homes for sale will continue to be a key theme for housing in the months ahead. Single-family is continuing to show gains, but the gains in permits are weaker than the gains in starts. Builders are starting what they already permitted earlier this year but are not bullish about demand this fall and winter."
 
Smoke added, "The seasonally adjusted rate of permitting was not statistically significant, essentially unchanged from last month at the highest level of permitting since February. On a year-to-date basis, permits in multi-family have declined 16 percent, while single-family permits are up 7 percent.  On a year-to-date basis, permits are up in every region but the Northeast where a massive 61 percent decline in multi-family is the cause of that region's year-to-date declines. Analysts had only been expecting a 1 percent decline in starts, but they were up 2 percent on a seasonally adjusted basis from the revised rate in June. Like permits, the seasonally adjusted rate was the best since February, and the non-adjusted actual estimate for the month was the highest since October 2007."