Today’s report on residential construction for June suggests that the housing market is bouncing back after a rough winter. Housing starts totaled 1.174 million units last month (seasonally adjusted annual rate)—close to a post-recession high. Meanwhile, newly issued building permits jumped to an eight-year high—a sign that construction activity will remain strong in the months ahead. Not surprisingly, home builders are upbeat these days. Industry sentiment in July rose to just shy of a ten-year high, according to yesterday’s update from the National Association of Home Builders (NAHB). In short, the housing sector is on track to provide additional support to the economy for the foreseeable future.
The bullish change in tone is quite clear when we look at year-over-year percentage changes for starts and permits. Indeed, permits–a leading indicator for construction activity–jumped 30% last month vs. the year-earlier level, which marks the strongest advance in over two years. Building activity proper isn’t far behind. New starts in July climbed nearly 27% in annual terms–the most in more than a year.
An increase in housing activity comes at an opportune time. Although the labor market has been posting solid gains in payrolls lately, manufacturing and retail sales have been weak. But if housing activity is strengthening, which seems to be the case, the upbeat trend will provide a timely boost to the US macro trend.
“As we head into the second half of 2015, we should expect a continued recovery of the housing market,” NAHB Chairman Tom Woods said yesterday with the release of the sentiment data. His forecast enjoys fresh support in today’s hard-data profile of housing activity.