US housing starts surge in July, beat expectations

US housing starts rose more than expected in July as the sector recovers from the Covid-19 pandemic, boosted by low mortgage rates, according to figures released by the Census Bureau on Tuesday.

Housing starts surged 22.6% on the month to a seasonally-adjusted annual rate of 1.496 million. This was ahead of expectations for a rate of 1.24m.

Meanwhile, single-family starts were up 8.2% on the month in July to an annualised rate of 940,000. Building permits also came in ahead of expectations, up 18.8% to 1.495m.

Capital Economics noted that single-family starts are now only 10% below their pre-Covid level.

"Flight to the suburbs may explain some of the increase in activity, but we suspect record low mortgage rates and tight existing home inventory are the primary drivers," said property economist Matthey Pointon. "After all, multifamily starts and permits also surged. Interest rates and inventory are set to say low, but soaring lumber prices mean growth in single-family starts will slow over the remainder of the year."

Oxford Economics said: "Strong demand and a record level of homebuilder confidence will support housing starts in the second half of 2020, but the still-widespread coronavirus and an economy struggling to recover without fiscal support may limit the upside."