Construction of new U.S. homes increased 22.6 percent last month as homebuilders bounced back from a decline in housing starts caused by the coronavirus pandemic earlier this spring.
The Commerce Department reported on Tuesday that new homes were started at at an annual pace of nearly 1.5 million in July, the highest since February and well above what economists expected. Housing starts have now risen for three months after slowdowns in March and April when the coronavirus paralyzed the American economy. July 2020 housing starts exceeded July 2019 numbers by 23.4 percent.
"U.S. housing starts blew the roof off of expectations in July...these ware the kind of gains seen after storms/hurricanes," Jennifer Lee, Senior Economist at BMO Capital Markets, wrote in a research note.
The biggest gains came from the construction of apartments and condominiums, which saw a 56.7 percent increase. Single-family home construction also rose by 8.2 percent.
The highest rate of construction was in the Northeast at 35.3 percent, followed by a 33.2 percent increase in the South and 5.8 percent increases in the West and Midwest.
Applications for building permits, a good indication of future activity, rose 18.8 percent from June , the highest since January and up 9.4 percent from July 2019.
The National Association of Home Builders reported Monday that builders' confidence this month matched a record high first reached in December 1998. "Strong demand and a record level of homebuilder confidence will support housing starts in the second half of 2020," economists Nancy Vanden Houten and Gregory Daco of Oxford Economics wrote. They warned however, if Congress fails to approve another rescue package, it could take a toll on the economy. "The still-widespread coronavirus and an economy struggling to recover without fiscal support may limit the upside" for the housing industry, they wrote.