Home construction in the U.S. rose by more than expected in June as builders rushed to fill a gap left by a dearth of existing homes for sale and surging demand from families fleeing cities.
Housing starts jumped by 6.3 percent in June, the Commerce Department reported Tuesday.
The rise in June put home construction at a seasonally adjusted annual rate of 1.64 million units. Economists had expected a rate of 1.59 million.
But the rate for May and April was revised down, indicating that some of the June construction was making up for a lower than expected construction earlier in the year.
Single-family starts rose 6.3 percent in June, and were up 28 percent year-over-year. Starts declined at the beginning of the pandemic due but then soared when it became clear that many younger American families wanted to move into houses earlier than typical.
Home construction starts rose 12.6 percent in the West and 9.7 percent in the South, offsetting high single-digit declines in the Northeast and Midwest.
Applications for building permits, which are used to forecast future activity, declined 5.1 percent in June to a seasonally adjusted rate of 1.59 million units. Applications for permits declined in all four regions. Those declines could validate some economists’ predictions that the surge in home building and sales over the past year may begin to slow, especially for single-family homes.
Supply chain problems caused by the coronavirus pandemic have hamstrung builders, who have faced material shortages and inflated prices for lumber, though the latter has moderated somewhat, at least at the wholesale level. In addition, enhanced unemployment benefits are keeping some Americans out of the workforce because the extra $300 a week makes it more lucrative to stay jobless.
Month-to-month, homebuilding activity has been on a wild ride so far this year, with several double-digit swings in either direction. But housing remains one of the stronger segments of the economy, with buyers far outnumbering sellers.
The 6.3 percent overall increase in home construction in June matched the 6.3% increase in single-family home construction which rose to a rate of 1.16 million units. A 6.8% rise in construction of apartments pushed that category to a rate of 474,000 units.