Homebuilders picked up the pace in breaking ground on new homes in July, reversing a two-month downward trend.

According to figures released Tuesday by HUD and the Commerce Department, privately owned housing starts last month were at a seasonally adjusted annual rate of 1.09 million, a 15.7 percent spike from June's upwardly revised rate of 945,000 and a 21.7 percent gain over the same month last year.

A survey of economists by Econoday forecast an adjusted rate of 963,000 new units for July.

Most of last month's improvement came from a surge in multifamily building, which was up 33 percent month-over-month to a rate of 423,000 as young adults show more preference toward renting.

Single-family starts also posted a solid gain, however, rising 8.3 percent to 656,000.

Single-family starts rose in three of the four Census regions, improving 3.8 percent in the Northeast, 4.2 percent in the West, and 16.9 percent in the South, which had seen a significant setback in homebuilding in June.

The Midwest, meanwhile, posted a 6.8 percent drop.

While new starts surged over the month, permit issuance looked weaker, climbing 8.1 percent to a seasonally adjusted yearly rate of 1.05 million. Single-family permits ticked up only 0.9 percent, while multifamily permits jumped 21.5 percent.

By region, permits for single-family homes increased in the Northeast (20 percent) and South (3.6 percent) and slipped in the Midwest (-4.6 percent) and West (-7.7 percent).

While permit issuance is climbing at a slower pace than starts, the latest confidence index from the National Association of Home Builders suggests builders haven't lost faith in the single-family market, with expectations for future sales leading the other index components—a sign that permit growth could pick up in the coming months.

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