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June Housing Starts Jump, But Future Uncertain

housing starts, house construction, building

The US June home building data, released Friday, were overwhelmingly positive, as low mortgage rates and continued state reopenings boosted confidence.

However, the resurgence of COVID-19 cases in several states in early-July, ongoing uncertainty, and extremely high unemployment may keep home building contained for the next few months.

The pace of housing starts surged by 17.3% to a 1.186 annual rate, slightly below the 1.195 million pace expected. Single-family starts rose by 17.2%, while multi-family starts rose by 17.5%.

Building permits, which precede starts activity, rose by 2.1% to a 1.241 million pace, with single-family permits up 11.8%, offset by a 13.4% decline in multi-family permits. The June permits gain suggests a further increase in the pace of housing starts is possible for July.

Homes under construction fell by 0.6% to a 1.162 million rate in June, but completions rose by 4.3% to a 1.225 million rate, suggesting an increase in supply of new homes available for sale.

The National Association of Home Builders sentiment index, released on Thursday, rose to 72 in June from 58 in May. The index was at a year high of 75 in January before sliding to a low of 30 in April.

That report showed increases in current single-family sales and the six-month outlook for sales for July, as well as the traffic of prospective buyers.

Additionally, the Mortgage Bankers Association’s weekly activity reading noted that applications continue to increase, indicating increased demand that will need to be met by an increase in supply.

Released later in the morning, the Michigan Sentiment index fell to a reading of 73.2 in early July from 78.1 in June, as COVID-19 cases rebounded in several states.

The current conditions reading fell to 84.2 from 87.1, while the expectations reading fell to 66.2 from 72.3, suggesting COVID concerns go beyond the current scope.

Also released Friday, the unemployment rate fell in 42 states in June following a decline in official national unemployment rate to 11.1% from 13.3% in May. The highest unemployment rates were recorded in Massachusetts (17.4%), New Jersey (16.6%), and New York (15.7%).

Nonfarm payrolls rose by 4.8 million in June. The state data released Friday showed payrolls rose in all 50 states and the District of Columbia. The largest increases were in California, up 558,200, and New York, up 301,600. The largest percent change gains were in Nevada, up 8.5% and Michigan, up 8.1%.

Kevin Kastner

Julie Ros

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