On Friday, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development released their Monthly New Residential Construction Report for June, and it reveals some hopeful data. All of the report’s top-level numbers were moving in the right direction, up over May’s stats — some substantially. But as a reality check on the construction industry’s mid-pandemic situation, many of the June 2020 figures continue to be down when comparing year-over-year.
A closer look at the numbers
The residential construction report is broken out into three main categories:
- Building Permits: These are permits issued for new privately-owned housing units. The permit has been approved but construction hasn’t begun.
- Housing Starts: These are new privately-owned housing units where construction has begun.
- Housing Completions: These are new privately-owned housing units that are ready for move-in.
Building permits are starting to show some builder optimism as they inch toward previous averages. For June, there were 1.24 million (seasonally adjusted) building permits issued for new residential construction projects. This represents a 2.1 percent increase over the May number, which was 1.22 million. However, it is 2.5 percent lower than the June 2019 rate of 1.27 million permits.
These June numbers get a little more interesting when you break them out by region. For single-family permits, numbers are up from May to June, as well as June 2019 versus June 2020, for all regions except the West, where permits are down 7.3 percent year over year.
The same goes for multi-family building permits, where numbers are up May to June everywhere except the South and the West, and are improved year-over-year everywhere except the Northeast and West.
More construction projects are starting to break ground across the country. Total housing starts (single- and multi-family) for June were at 1.19 million (seasonally adjusted), which is 17.3 percent higher than May’s numbers (1 million). However, June 2020 was still down 4.0 percent compared to June of last year, which saw 1.24 million total housing starts.
Again, breaking this data out by region reveals a fuller, though varied picture of the nation’s residential construction industry. Looking at the Northeast, for example, we see that single-family home starts jumped a whopping 111.8 percent from May to June of this year, and total starts (single- and multi-family) projects increased 114.3 percent month-over-month.
However, the year-over-year numbers for the Northeast are mixed. While single-family starts in the Northeast increased 53.2 percent in June 2020 versus June 2019, total starts in that region were down 5.4 percent year-over-year for June.
Housing completions also show a somewhat mixed bag for June. The month saw 1.23 million total residential (single- and multi-family) units completed, which is a 4.3 percent increase over May’s 1.174 million completed projects. It is also a solid 5.1 percent increase over June 2019’s number (1.166 million).
But digging into these numbers, we see that some regions of the country did much better than others on this front. Again, the Northeast suffered both month-to-month and year-over-year dips in their numbers. While single-family units rose 13.7 percent from May to June, total completions during that time were down 22.9 percent. Comparing June 2019 to June 2020, single-family completions were down 17.1 percent and total completions were down 35.1 percent.
In the Midwest, the completion numbers look more promising. From May to June of this year, single-family completions were up 19.1 percent, and all completions were up 5.3 percent. Year-over-year for June, the Midwest had a 7.9 percent increase of single-family completions and a 34.9 percent increase in total completions.
What does this mean for residential construction?
We can extrapolate some hypotheses from these residential construction figures. For example, we might guess that because the Northeast was hard-hit by the pandemic early on, with mandatory shutdowns, it pummeled the region’s construction industry in April and May, with a recovery beginning in June. Other regions, such as the South and West, are just now experiencing the ravages of the pandemic, so we may see a dip in future numbers for them.
We also can glean some tangential information from Industry Intelligence on niches related to residential construction. For example, looking at Residential Building Contractors on the Vertical IQ COVID-19 webpage:
- The residential construction industry gained 19,100 jobs between May 2020 and June 2020, an increase of 2.5 percent. Industry employment was down 2.6 percent in June 2020 versus year-ago.
- Builder confidence rose 14 points in July 2020 to 72, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), reflecting the industry’s optimism regarding economic recovery. Any reading above 50 is considered a signal of positive builder confidence. The April 2020 decline to 30 was the largest single monthly change in the history of the index and marks the lowest builder confidence reading since June 2012.
Looking at the Framing Contractors section of the Vertical IQ COVID-19 webpage, we find:
- The specialty trade contracting industry gained 135,400 jobs between May 2020 and June 2020, an increase of 3.1 percent. Industry employment was down 4.2 percent in June 2020 versus year-ago.
- By July 10, the Random Lengths Framing Lumber Composite Price rose to $523 per thousand board, up from a low of $348 in mid-April, according to the National Association of Home Builders (NAHB). Reduced mill production coupled with rising demand from DIY projects and ongoing construction projects contributed to the rise in lumber prices at a time when other building material prices fell.
Turning the corner?
So, on the whole, the residential construction industry seems to be moving in the right direction based on most indicators. However, the industry has not yet recovered fully from the many woes created by this pandemic. The July and August numbers will be telling, as we see how the growing number of COVID-19 cases in the South and West, and potential shutdowns, impact the nation’s overall residential building industry.
You can learn more about how these and other industries have been impacted by COVID-19 by visiting our free COVID-19 webpage.
Photo credit: Avel Chuklanov via Unsplash