Implications: Home building continues to be a bright spot for the US economy. Housing starts rose 4.8% in June, beating consensus expectations. In fact, the pace of starts in the second quarter as a whole was the fastest since 2007. While starts are 2% below a year ago, that's due to a surge in multi-family home building in June of last year, which made it the strongest month for overall home building in all of 2015. Starts in June this year were a solid 7.3% higher than the average for all of 2015. Moreover, the "mix" of homes being built is improving. When the housing recovery started, multi-family construction generally led the way. The number of multi-family units now under construction is the highest since the early 1970s. But the share of all housing starts that are multi-family appears to have peaked in 2014-15 and single-family building is starting to climb more quickly. This trend should continue. Single-family building permits are up 5.1% from a year ago while multi-family permits are down 34.3%. The shift in the mix of homes toward single-family units is a positive one because, on average, each single-family home contributes to GDP about twice the amount of a multi-family unit. Based on population growth and "scrappage," housing starts should rise to about 1.5 million units per year, so a great deal of the recovery in home building is still ahead of us. It won't be a straight line higher, but expect the housing sector to keep adding to real GDP growth in 2016-17. In other recent housing news, the NAHB index, which measures sentiment among home builders, slipped to 59 in July from 60 in June. However, 59 is still well above 50, showing that the index remains in healthy expansion territory. More jobs and faster wage growth are making it easier to buy a home and builders are responding.
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