US new home construction in June jumps 19%: Multi-family home construction surges 76% to "hold the fort," while single-family home construction remains stagnant in the cold.

In June, new home construction in the United States jumped 19% from the previous month, driven entirely by a sharp increase in apartment projects. However, the construction and permits for single-family homes continued to decline, highlighting the ongoing suppression of residential investment due to high interest rates, high inventory, and the uncertainty brought about by the Middle East conflict. Data released by the US Department of Commerce on Friday showed that new home construction in June increased by 19.0% on an annualized basis, reaching 1.427 million units (approximately 1.43 million units), a three-month high and well above market expectations. However, this rebound was almost entirely driven by multi-family residential buildings: the construction of apartment buildings with five units or more surged by 76.3% on a monthly basis to an annualized 513,000 units, following a sharp drop of nearly 40% the previous month. This reflects the high volatility of multi-family housing data on a monthly basis, with high house prices and high mortgage rates pushing some housing demand towards the rental market, providing support for apartment construction. In stark contrast, construction of single-family homes, which dominates residential investment, fell slightly by 0.2% on a monthly basis to an annualized 895,000 units, a 3.2% decrease year-on-year, following a decline after a lackluster spring season. Single-family home builders continue to face pressure from high unsold new home inventories (close to levels seen at the end of 2007) and weak demand, resulting in widespread efforts to increase sales incentives. A survey by the National Association of Home Builders (NAHB) showed that builder confidence in single-family homes remained low in July, attributed to the economic uncertainty brought about by the Middle East conflict, rising material and land costs, and mortgage rates that remain high. Forward-looking indicators paint a chilling picture. Overall construction permits in June fell by 3.0% on a monthly basis to an annualized 1.367 million units, the lowest since March. Specifically, permits for single-family homes decreased by 2.4% on a monthly basis to 871,000 units, hitting a ten-month low and a 0.2% decrease year-on-year; permits for multi-family homes also fell by 4.9% on a monthly basis to 445,000 units. As a leading indicator of future construction, the decline in permit data across the board suggests that construction activity may cool down in the future. Analysts believe that high mortgage rates continue to suppress purchasing power. Data from Freddie Mac shows that since the end of February when the US and Israel launched joint attacks on Iran, 30-year fixed mortgage rates have risen by nearly 60 basis points, reaching an 11-month high of 6.55% this week. In this context, the GDPNow model of the Atlanta Fed previously predicted that residential investment would have a minimal impact on GDP in the second quarter. Regionally, new home construction in major regions increased in June. The largest housing construction region in the United States, the South, saw a 15.2% increase in construction, mainly driven by multi-family projects; construction in the Midwest reached the highest level since 2024. On the policy front, industry research analyst Drew Leiding pointed out in a briefing earlier this week that the recently passed "21st Century Housing for All Act" (or bipartisan affordable housing legislation) is seen as a long-term positive, especially for post-construction rental communities and factory-built housing developers. The legislation includes provisions to restrict large-scale purchases of single-family homes by investment companies, and to accelerate or exempt certain projects from environmental reviews. However, as the implementation of these provisions will take time, the analyst believes that it will be difficult to make substantial improvements to the industry in the short term. It is worth noting that the bill became law automatically without President Trump's signature, as Trump had requested that Congress first pass a separate voting bill. The government report also notes that monthly data on new home construction fluctuates greatly, with the overall change in June falling between 3.1% and 34.9% within a 90% confidence interval, indicating the possibility of significant revisions in the future.