Housing starts and permits defied expectations in June, moving in opposite directions and against consensus predictions, according to data released today by the U.S. Department of Commerce.
Permits, which had been expected to rise last month, were down 3.7% on a monthly basis to a seasonally adjusted annual rate of 755,000, although the statistic remained 19.3% higher year-over-year. However, the decline was driven by the multifamily sector, which is prone to larger swings due to the bulk nature of multifamily projects and which saw an 11.4% drop in permits in June after a spike in May.
Among single-family projects, permits rose 0.6% for the month to a rate of 493,000, the highest level seen in more than two years. In the West, permits rose to the highest level in nearly four years.
Privately owned housing starts, which had been expected to decline after a 4.8% drop in May, instead bounced up 6.9% to a seasonally adjusted annual rate of 760,000, leaving them 23.6% higher on an annual basis. Single-family starts gained 4.7% for a rate of 539,000; starts for multifamily structures of five units or more were up 17.0% to a rate of 213,000. Chalking May’s poor performance up to "payback for weather-related gains earlier in the year," Patrick Newport, U.S. economist at IHS Global Insight, wrote in a note discussing the numbers today that, "June’s gain was a return to a trend line that is tilting slightly upward."
In comparing last year’s 535,000 starts to June’s annual rate of 760,000, Newport wrote, "the difference between these two numbers clearly shows that the housing market is back on track. But the low level also shows that we have far to go. If conditions were normal, the economy would need to put up at least 1.5 million units a year to meet demand . … We are not expecting 1.5 million gains until 2015."
Claire Easley is a senior editor at Builder.
Learn more about markets featured in this article: Greenville, SC.