Both housing starts and permits were up sharply in July from June, with increases of 23 percent and 18 percent, respectively. Although starts and permits are still below their levels in early 2020, they have bounced back sharply following a steep coronavirus-related drop in the spring. Homebuilding will be an important contributor to economic recovery in the second half of 2020.

Housing starts were 1.496 million at a seasonally-adjusted annualized rate in July, up from 1.220 million in June (revised up from 1.186 million). Single-family starts were 940,000 in July, up 8 percent from June. Multifamily (housing and condominium) starts, which tend to be more volatile, jumped 58 percent in July, to 556,000. This was the biggest one-month increase in multifamily starts since 2011.

Although total starts in July were down from their recent peak of 1.617 million in January, they were up 67 percent from their trough of 934,000 in April, when many construction sites were shuttered because of state restrictions due to the pandemic. Total starts were up 23 percent in July from one year earlier, with single-family starts up 7 percent.

Housing permits rose 19 percent in July from June, to 1.495 million. Single-family permits rose 17 percent over the month to 983,000, while multifamily permits rose 22 percent to 512,000.

Housing permits in July were down less than 3 percent from their recent peak in January, and were up 40 percent from their trough in April. Permits were up 9 percent in July on a year-over-year basis, including a 16 percent increase for single-family starts.

Homebuilding is roaring back after a steep contraction earlier this year due to the coronavirus pandemic and restrictions on economic activity. Total starts fell 42 percent between January and April, but have since made up more than four-fifths of that decline. Rising permits in July point to further gains in homebuilding into the fall.

Residential construction will be a key driver of near-term economic recovery. Low mortgage rates are supporting home buying, and there is substantial pent-up demand for new homes after the coronavirus restricted sales in the spring. It could also be that the pandemic is causing households to switch from multifamily to single-family homes, supporting new construction. PNC expects housing starts to average 1.33 million in 2020, up slightly from 1.30 million last year. Starts will then rise to 1.61 million in 2021 and 1.67 million in 2022.

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