Housing Starts Were Up In July, But Don’t Get Used To It

Housing starts bounced back slightly in July, driven by strong growth in the multi-family sector, according to data released Tuesday by the U.S. Census Bureau. 

The number of new homes started in July rose to a seasonally adjusted annual rate of 1.428 million units, up 5.2% from June and 12.9% compared to a year ago. The mutli-family sector came in at an annual rate of 470,000 units, up 11.6% month over month and 27.4% annually. The single-family sector also recorded gains, increasing 2.8% on a monthly basis and 7.8% on a yearly basis to 939,000 units. 

“Housing starts jumped in July, primarily on the back of the multi-family sector. Multi-family starts surge for a second straight month, while single-family starts managed a slight rebound from the previous month,” Odeta Kushi, First American’s deputy chief economist, said in a statement. “Despite a modest uptick after a four-month streak of declines, single-family permits — a leading indicator of future construction — remain near their lowest level since March 2023, signaling continued weakness in the sector.”

The number of building permits issued was also at a lower seasonally adjusted annual rate than both last month (-2.8%) and a year ago (-5.4%), at 1.354 million units. The single-family sector posted the only gain for building permits, rising 0.5% month-over-month to 870,000 units. However, this was still down 7.9% annually. The multi-family sector was down to 430,000 units, representing a 9.9% monthly decline and a 1.8% annual decrease. 

“The monthly increase in housing starts and permits is a welcome development, but one data point doesn’t make a trend. Sustained gains are needed to demonstrate continued progress in single-family homebuilding,” Kushi said. “The housing market remains structurally undersupplied, and we need more hammers at work to build the homes that are still in short supply.”

Housing completions were up on a month-over-month basis rising 6.0% to 1.415 million, but they were down 13.5% annually. This monthly increase came as the pace of single-family completions rose to 1.022 million, up 11.6% from June. 

Looking ahead, economists are not very optimistic about the future of the new construction market. 

“There’s no other way to say it: U.S. home construction is in a funk. The nation desperately needs more homes that are affordable, but home construction is depressed and is only likely to get worse in the months to come,” Heather Long, the chief economist at Navy Federal Credit Union, said in a statement.

“Housing starts and completions are on track to be barely above 1.4 million for this year, and building permits have fallen below that anemic level, meaning next year could be even worse for home building. The United States needs roughly 2 million new homes built a year to keep up with demand and need, but builders aren’t going to boost production at a time when costs are rising and mortgage rates remain so high that buyers are scared to purchase anything right now.”

Regionally, housing starts were up month over month in the Midwest (33.3%) and the South (19.2%) to seasonally adjusted rates of 252,000 units and 833,000 units, respectively. The Northeast (111,000 units) and West (232,000 units) posted monthly declines, falling 26% and 27.5%, respectively. The same trends continued on a year-over-year basis, with the Midwest (+40.8%) and the South (+29.5%) recording increases and the Northeast (-35.5%) and the West (-14.4%) recording decreases.