A report released by the Commerce Department on Friday showed a substantial increase in new residential construction in the U.S. in the month of June.
The Commerce Department said housing starts spiked by 17.3 percent to an annual rate of 1.186 million in June after jumping by 8.2 percent to an upwardly revised rate of 1.011 million in May.
Economists had expected housing starts to soar by 20 percent to a rate of 1.169 million from the 974,000 originally reported for the previous month.
With the increase, the annual rate of housing starts continued to recover from the five-year low of 934,000 set in April.
“We look for strong demand, improved homebuilder confidence, and an ongoing shortage of supply to support growth in housing starts over the rest of the year, but downside risks are increasing due to the resurgence in Covid-19 cases,” said a note from economists at Oxford Economics.
The economists added, “The South and West, which are the regions seeing the largest rise in cases, accounted for about 75% of June housing starts.”
The jump in housing starts came as single-family starts surged up by 17.2 percent to a rate of 831,000, while multi-family starts skyrocketed by 17.5 percent to a rate of 355,000.
The report also said building permits increased by 2.1 percent to an annual rate of 1.241 million in June after surging up by 14.1 to a downwardly revised rate of 1.216 million in May.
Building permits, an indicator of future housing demand, had been expected to jump by 5.7 percent to a rate of 1.290 million from the 1.220 million originally reported for the previous month.
While single-family permits spiked by 11.8 percent to a rate of 834,000, multi-family permits plunged by 13.4 percent to a rate of 407,000.
Despite the monthly increases, housing starts and building permits remained below year-ago levels, slumping by 4.0 percent and 2.5 percent, respectively.
On Thursday, the National Association of Home Builders released a separate report showing another substantial improvement in homebuilder confidence in the month of July.
The report said the NAHB/Wells Fargo Housing Market Index surged up to 72 in July after skyrocketing to 58 in June. Economists had expected the index to inch up to 60.
With the much bigger than expected jump, the NAHB noted the index now stands at the solid pre-pandemic reading in March before the coronavirus outbreak affected much of the nation.