Housing starts beat expectations, rising to 1.189 million (annualized) in June. That increase follows a downward revision to the May data. Both single- and multifamily homes posted increases compared to the previous month. Multifamily starts reached 411,000, the highest level since last September. Single-family starts continued to trend higher at 778,000, led by gains in the Northeast.
All major regions posted gains in respective single-family starts for June. Starts in the Northeast spiked higher by 18,000 while the other regions combined managed an increase of only 15,000. We do not expect the strength in the Northeast to persist as it accounts for less than 10% of single-family starts. Multifamily starts moved back above the 400,000 mark in June, led by the West (+42,000) & the Northeast (+19,000), while starts in the Midwest & the South declined.
Applications for building permits also increased in June to 1.153 million. That is welcome news after permits softened earlier in the year. Even with the June increase, permits have not recovered to the levels we saw late in 2015. Backlogs in the permitting process are holding back construction activity in many areas.
Bottom Line: The housing market continues to trend higher, albeit slowly, even in the face of permitting delays. The ongoing shortage of new housing stock, particularly in the entry-level market, will continue to push home prices higher and suppress the volume of new home sales.