WASHINGTON (Reuters) – U.S. homebuilding increased in June by the most in nearly four years amid reports of rising demand for housing in suburbs and rural areas as companies allow employees to work from home during the COVID-19 pandemic.
But a resurgence in new coronavirus infections across the country eroded consumer sentiment in mid-July, other data showed on Friday, threatening the nascent housing and economic recovery. Some areas in virus hot spots in the populous South and West regions have either shut down businesses again or paused reopenings.
The economy slipped into recession in February.
“Home building is coming back at a steady, if unspectacular pace,” said Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia. “The numbers also verify that many people are leaving, or planning to leave, big cities as telecommuting becomes the norm for many businesses.”
Housing starts increased 17.3% to a seasonally adjusted annual rate of 1.186 million units last month, the Commerce Department said. The percentage gain was the largest since October 2016. Data for May was revised up to a 1.011 million-unit pace from the previously reported 974,000.
Still, homebuilding remains 24.3% below its February level. The South and the West accounted for about 75% of housing starts last month. Economists polled by Reuters had forecast starts increasing to a rate of 1.169 million units.
A survey on Thursday showed confidence among single-family homebuilders vaulting in July to levels that prevailed before the coronavirus crisis upended the economy in March.
Builders reported increased demand for single-family homes in lower density markets, including small metro areas, rural markets and large metro suburbs. The public health crisis has shifted office work from commercial business districts to homes, a trend that economists predict could become permanent.