US housing starts surged by more than expected in July, boosted by pent-up demand from the coronavirus pandemic and low mortgage rates.
Privately owned housing starts in July were at a seasonally adjusted rate of 1.5 million, the Commerce Department reported Tuesday. That was a 22.6% increase from the revised June estimate of 1.22 million, the largest jump since October 2016.
The July number also smashed economist forecasts for a 1.25 million annualized rate, a roughly 2.5% increase from June.
"Housing construction blew past expectations, cementing the industry as one of the solid pillars of the recovery," said Robert Frick, corporate economist at the Navy Federal Credit Union. "A combination of low mortgage rates and pent-up demand from years of low building that left the housing stock far below the demand is spurring builders."
In addition, building permits in July came in at a seasonally adjusted rate of 1.5 million, an 18.8% increase from June and the biggest jump since 1990. They also exceeded economist expectations of a 1.33 million increase, and are now above pre-pandemic levels from February.
The housing market has had a strong rebound from the shock of the coronavirus pandemic, fueled by pent-up demand from lockdowns to contain the disease and record-low mortgage rates. There are signs that the recovery in housing will continue — in August, homebuilder optimism jumped to the highest level since 1998.
"Building starts and permits, especially in the South, point to a strong sector through the rest of the year, meaning not only more homes to buy, but more jobs from trades workers to materials makers," said Frick.
Single-family starts increase 8.2% in July at an annualized rate of 940,000, while multifamily starts surged 58.4% at a pace of 556,000. Single-family permits jumped 17% to a rate of 983,000.
