More buyers were out shopping for new homes last month. Single-family housing starts rose 17.2% in June to a seasonally adjusted annual rate of 831,000, the U.S. Commerce Department reports. The multifamily sector—which includes apartment buildings and condos—increased 17.5% last month.
“The housing market is hot,” says Lawrence Yun, chief economist for the National Association of REALTORS®. “Home buyers have swiftly moved into the market to take advantage of the unimaginably low mortgage rates.” Freddie Mac reported a new record low for the 30-year fixed-rate mortgage last week, averaging 2.98%.
But “inventory is lacking with a sizable backlog of buyers getting outbid by others,” Yun says. “More homes therefore need to be built to help relieve the housing shortage.”
Yun called the latest increase in housing starts—which includes single-family and multifamily construction—of 1.186 million “only a bare, partial recovery after a shutdown” from the COVID-19 pandemic. He says the country needs at least 1.5 million units.
“Building more homes also has an added benefit of boosting the local economic growth,” Yun adds. “In the meantime, expect multiple offers to be common on many mid-priced homes for the remainder of the year.”
Home builders are reporting increased demand for new homes, despite the challenges of the COVID-19 outbreak and elevated unemployment numbers, says Chuck Fowke, chairman of the National Association of Home Builders. “Demand is growing in lower density markets, including exurbs and small metros,” he notes.
But builders face challenges in rising costs, particularly increasing prices for lumber, adds Robert Dietz, the NAHB’s chief economist.
Still, builders are ramping up inventories. Housing permits, a gauge of future construction, increased 2.1% in June to 1.24 million units for an annual rate in June. Single-family permits surged 11.8% to an 834,000 unit rate, while multifamily permits fell 13.4% to a 407,000 pace.
Overall, housing construction is seeing the largest increases in the West and Midwest. On a regional and year-to-date basis (January through June compared to a year ago), combined single-family and multifamily housing starts were 2.9% higher in the West and 2.2% higher in the Midwest. Housing starts also eked out a 0.2% increase over that period in the South, but are 5.4% lower in the Northeast.
