The Commerce Department released a report on Wednesday highlighting a substantial rebound in new residential construction in the U.S. for June. According to the report, housing starts surged by 3.0 percent to an annual rate of 1.353 million in June, following a 4.6 percent decline to a revised rate of 1.314 million in May.
Economists had projected housing starts to climb by 2.6 percent, reaching a rate of 1.310 million from the originally reported figure of 1.277 million for May. The increase in housing starts was driven by a significant rise in multi-family starts, which more than compensated for a marked decline in single-family starts.
The Commerce Department detailed that multi-family starts soared by 19.6 percent to an annual rate of 373,000, whereas single-family starts fell by 2.2 percent to an annual rate of 980,000.
"Builders are pulling back on single-family projects as they anticipate a broader economic slowdown," said Jeffrey Roach, Chief Economist for LPL Financial. "Elevated mortgage rates are deterring prospective buyers, but demand for condos appears quite resilient."
"Multi-family projects are sustaining the construction industry after a slump earlier this year," Roach added. "We might see a modest recovery in single-family projects if the Fed reduces rates and mortgage rates decline."
The report also indicated that building permits, which signal future housing demand, rose by 3.4 percent to an annual rate of 1.446 million in June, following a 2.8 percent drop to a revised rate of 1.399 million in May. Building permits were initially expected to increase by 0.3 percent to an annual rate of 1.390 million from the originally reported 1.386 million for the previous month.
Multi-family permits experienced a 15.6 percent spike to an annual rate of 512,000, while single-family permits declined by 2.3 percent to an annual rate of 934,000.
Separately, the National Association of Home Builders (NAHB) reported on Tuesday that homebuilder confidence in the U.S. unexpectedly declined in July due to persistently high mortgage rates affecting sentiment. The NAHB/Wells Fargo Housing Market Index fell to 42 in July from 43 in June, contrary to economists' expectations of a rise to 44.
This unexpected decrease brought the housing market index to its lowest level since reaching 37 in December of the previous year.
