Steel Markets

Housing Market's “V” Recovery Continues in July

August 18, 2020

The housing industry continued to be a boost to the economy in July. Housing starts jumped 22.6 percent in July to a seasonally adjusted annual rate of 1,496,000 from the revised June rate of 1,220,000. Compared to a year ago, housing starts were up 23.4 percent.

“Demand is being supported by low interest rates and a renewed focus on the importance of home amid the virus crisis,” said Robert Dietz, chief economist at the National Association of Home Builders.

Single-family starts climbed 8.2 percent from June and construction of homes with five units or more soared 56.7 percent. Housing starts gained ground in all four regions with the Midwest jumping 35.3 percent from June and the South 33.2 percent. A 5.8 percent gain was reported in both the Midwest and West.

Housing permit authorizations, a predictor for future building, leapt 18.8 percent from June to July to a SAAR of 1,495,000. Permit authorizations were 9.4 percent higher than a year ago.

Single-family starts rose 17 percent and multi-unit housing 23.5 percent. Permit activity was strong across all regions, jumping month-over-month by 14.8 percent in the Northeast, 23.8 percent in the Midwest, 13.7 percent in the South and 29.1 percent in the West.

The strong data in July’s report complements the latest NAHB/Wells Fargo Housing Market Index released earlier this week. The HMI, indicating builder confidence in the market for newly-built single-family homes, rose six points to 78 in August—the highest reading in its 35-year history and matching the record set in December 1998.

“Housing has clearly been a bright spot during the pandemic and the sharp rebound in builder confidence over the summer has led NAHB to upgrade its forecast for single-family starts, which are now projected to show only a slight decline for 2020,” said Dietz. “Single-family construction is benefiting from low interest rates and a noticeable suburban shift in housing demand to suburbs, exurbs and rural markets as renters and buyers seek out more affordable, lower density markets.”

The sharp rise in home building, however, has created issues for raw materials pricing.

“The V-shaped recovery for housing has produced a staggering increase for lumber prices, which have more than doubled since mid-April,” said NAHB Chairman Chuck Fowke. “Such cost increases could dampen momentum in the housing market this fall, despite historically low interest rates.”