Homebuilding Remains Very Strong

• Housing starts in June increased 6.3% to 1.643 million annualized units, above consensus expectations for a 1.2% increase.
• Building permits in June decreased 5.1% to 1.598 million annualized units, below consensus expectations for a 0.7% increase.
• Housing fundamentals are solid and residential construction will continue to improve into 2022.
  

Housing starts rose 6.3% in June to 1.643 million annualized units, above consensus expectations for a 1.2% increase to 1.590 million. Starts in May were revised lower to 1.546 million from 1.572 million. Housing starts rose in the South and West regions.

Single-family starts rose 6.3% in June to 1.160 million. Multifamily (apartment and condominium) starts were up 6.2% to 483,000; multifamily starts tend to be more volatile than single-family starts.

Residential construction permits decreased 5.1% to 1.598 million; May permits were revised slightly higher to 1.683 million from 1.681 million. Single-family permits fell 6.3% to 1.063 million. Multi-family permits fell 2.6% to 535,000. Housing completions were down 1.4% in June to 1.324 million.

Building permits have decreased for three straight months but are 23.3% above the June 2020 level. Builder confidence as measured by the NAHB Housing Market Index is at an eleven-month low but has been well above the 50-point threshold since July last year.

Housing fundamentals are good. Mortgage rates are low, consumer balance sheets are solid, the job market is improving, and there’s a growing demographic of potential home buyers. However, rising homebuilding and labor costs are near-term constraints while a shortage of developable land is a long-term constraint. The run-up in prices will erode affordability and cool demand but the housing sector will remain in great shape through the year. PNC Economics expects residential construction to continue to improve into 2022 boosting the overall economy.

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