The U.S. Department of Housing and Urban Development statistics released by the Commerce Department on Tuesday, show that the economic recovery is gathering momentum, providing another signal favoring a rates hike by the Federal Reserve in September.
Privately owned housing starts in July totaled 1.206 million units which represents an increase of 0.2% above the revised June total of 1.204 million. The July figure however is an impressive 10.1% higher than the July 2014 total of 1.095 million homes.
Building work started on 782,000 single-family homes during July which is 12.8% more than the revised June total of 693,000. Buildings with five or more accommodation units started in July stood at 413,000.
Meanwhile, the number of new home start-ups for July exceeded the expectations of a survey that MarketWatch conducted on Wall Street where the forecast was for 1.19 million.
The number of new homes under construction rose to a seven-year high in July which accounts for the highest degree of optimism since 2006 expressed by home builders on Monday. Factors adding impetus to the housing industry include low interest rates, steadily improving numbers of people in jobs accompanied by an increase in the hourly wages paid to workers, all signs of an economy that is improving.
Stephen Stanley, the chief economist at Amherst Pierpont Securities, commented that, “The narrative from industry sources is that demand is as good as it has been at any time since the bust.”
The good news is however tempered by a drop in the number of building permits for privately owned housing units issued in July to 1.119 million from the June figure of 1.337 million, a decline of 16.3%. The July 2015 total was none the less 7.5% higher than July 2014 estimate of 1.041 million.
Single family permits were issued for 679,000 single family homes while 412,000 were issued for buildings with 5 or more housing units for July.
The decline in permits can be ascribed to the fact that an incentive to build apartments in New York expired in mid-June and builders rushed to file for permits before the expiry of the tax benefits incentive.
The Great Recession has seen a change in the demographics with the percentage of people who own their own homes at its lowest level in decades while the number of Americans living in rented accommodation is at its highest levels since the 1970’s.
This accounts for the fact that a large percentage of the new housing units built since the end of the recession are multi-dwelling units which are meant to be rented out to those unable to afford to own their own homes.