US: Home building regains momentum as supply shortage begin to ease – Wells Fargo

Housing data released on Tuesday came in mixed. Housing starts rose 6.3% in June to a 1.643 million-unit pace, with both single-family and multifamily starts rising solidly, explained analysts at Wells Fargo. They point out the net result is still stronger than had been expected, however, and new home construction and apartment development both appear to be regaining any momentum they lost earlier this spring.

Key Quotes: 

“Housing starts rose 6.3% in June to a 1.643 million-unit pace, with both single-family and multifamily starts rising solidly. Data for May were revised slightly lower. The net result is still stronger than had been expected, however, and new home construction and apartment development both appear to be regaining any momentum they lost earlier this spring.”

“Housing permits fell 5.1% in June, marking their third consecutive drop. Single-family permits fell 6.3% and multifamily permits fell 2.6%. Permits tend to be less volatile than starts and have been running significantly above starts for the past year. June's decline brings permits back in line with starts, but there remains a large backlog of housing units authorized but not started.”

“The rise in housing units authorized but not started is consistent with the new home sales data, which show a persistent rise in share of sales where construction has not yet started. Builders have been managing their way through supply chain bottlenecks by limiting sales in new home communities. Once supply chain bottlenecks ease further, sales caps will be lifted and both sales and housing starts will strengthen. The latest data remain consistent with our forecast for 1.60 million housing starts this year.”

“The increase in homes under construction will bring some much needed inventory to the market.”

“Single-family starts rose 6.3% to a 1.160 million-unit pace, which is the second highest level this year.”