US housing starts increase at fastest pace in four months

Washington - Residential construction ended the second quarter on a stronger note as groundbreaking on new homes rebounded in June at the fastest clip in four months, Commerce Department data showed on Wednesday.

Highlights from housing starts (June)

• Residential starts increased 8.3% to a 1.22 million annualised rate (est. 1.16 million)

• Starts for May were revised to 1.12 million from 1.09 million

• Permits, a proxy for future construction, climbed 7.4% to a 1.25 million annualised rate

Key takeaways

The pickup in construction last month reflected more starts of single-family homes as well as apartment and other multifamily dwellings. The gain in June starts ended a three-month slide that indicates residential building will do little for second-quarter economic growth.

While construction improved in June and demand is holding up, builders have become a bit less upbeat because of higher costs for construction materials such as lumber. Sentiment dropped to an eight-month low, according to an industry report yesterday, wiping out the post-election boost in enthusiasm as builders expected deregulation and tax reform to spur more growth.

Homebuilders also say shortages of land and skilled labour are limiting construction even as affordable borrowing costs and solid labor-market gains encourage prospective buyers.

Economist views

“Demand for new housing continues to outpace supply,” NatWest Markets economists, led by Chief US Economist Michelle Girard, wrote ahead of the report. “Builders remain confident about the industry’s ability to continue expanding gradually, with the greatest challenge being the lack of both buildable lots and skilled labor.”

Other details

• Report shows a wide margin of error, with a 90% chance that last month’s change in starts fell between a 7.5% decline and a 24.1% gain.

• Construction of single-family houses rose 6.3% to an 849 000 annualised pace, also the strongest in four months.

• Groundbreaking on multifamily homes, such as townhouses and apartment buildings, jumped 13.3% to an annual rate of 366 000.

• Starts advanced in three of four regions, including a 22% surge in the Midwest and a 1.6% gain in the West.

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