July Housing Starts Surge

Not to anyone’s surprise, but the Commerce Department reported that housing starts surged by 22.6%. This represents the largest increase in nearly four years dating back to October 2016. Housing starts came in at 1.496 million units in July, which was revised upwards by 1.22 million. The number of starts reported in June came in at 1.186 million units.

The surge came in higher than expected for a couple reasons. First, prior to this, there were significant concerns over skilled labor shortages. Second, there was also some trepidation that material shortages would also crimp builders’ ability to make the progress that they were able to.

The economic disruption that followed the outbreak of the COVID-19 pandemic only proved to fuel builders’ enthusiasm to make up for lost time.

The surge also had an effect on the shares of publicly traded construction companies such as DR Horton and Lennar Corporation.

Some of the building surge came as a result of demand being created by the mass exodus from high density populated cities such as New York. According to the Commerce Department, the Northeast increased by 35% from June; the South increased by 33% from June.

In addition, the report indicated that multifamily construction of 5 units or more increased by over 50%.

The pent-up buyer demand that came as a result of the shut down of the pandemic, compounded by the capacity of builders to begin construction, has made the 2020 real estate market only move higher. Building permits issued for July 2020 increased by 18.8%, translating into 1.495 million, increased from 1.258 million in June.