U.S. homebuilding eased ever-so-slightly last month, following an outsized gain in June. However, building permits, a more forward-looking metric, rose strongly in July, reaching their highest level in four years, climbing to an annualized rate of 760,000 homes.
All told, housing starts came in at 746,000 homes annually in July, lower than a downwardly revised total of 754,000 homes in June. Initially, the June starts total had been estimated at 760,000 units. These slight month-to-month adjustments aside, the fact remains that housing is on the mend, as indicated rather strongly by the 21.5% year-to-year swing in starts.
Breaking the latest report down somewhat, we find that construction of single-family homes, which makes up about two-thirds of the aggregate total of houses started, fell by 6.5% last month, to a rate of 502,000 units. Single-family homebuilding, however, is up by 17% from a year earlier. Moreover, construction of multi-family units jumped in July, rising from an annual rate of 209,000 homes in June to 229,000 residences last month. A multi-family home consists of properties of five or more units.
Taken in perspective, the housing market has come bank strongly from the April, 2009 cyclical low of 478,000 homes, to the current 746,000 total, a comeback of 56%. However, one must recall that in early 2006, there were more than 2.3 million homes being started. As the housing bubble collapsed, the country was understandably left with bloated inventories that have taken years to work down. Looking at the long-term picture, there have been an annual average of some 1.5 million homes started per year since 1959, when such records started to be kept.
Meanwhile, builders are becoming more upbeat on the outlook for the housing market. To wit, the National Association of Homebuilders yesterday intoned that confidence is now up for four straight months, rising by two points in August to a reading of 37. A reading above 50 is the point at which widespread optimism would prevail. We are thus a ways from that point, but we are making some progress, and doing so now rather consistently.
Taking it all in, this sector, once one of the weaker links in the overall economic chain, is now showing some healthy progress. Housing is not yet a strong point by any means, but it is clearly no longer a drag on things. And given housing's extended reach, that is a very encouraging turn of events going forward.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.