US home building jumps 15.7% in July, offsetting earlier downturns

WASHINGTON (ICIS)–US new home construction rose by 15.7% in July from June, the country’s Department of Commerce said on Tuesday, offsetting in part sharp downturns recorded in May and June.

In its monthly report, the department said that housing starts last month were at a seasonally adjusted annual pace of 1.09m units, a gain of 15.7% from the upwardly-revised June figure of 945,000.

The June housing starts figure initially had been reported as 893,000.

While the upturn in July’s overall housing starts was very strong at 15.7%, much of that advance was attributed to a 33% jump in new construction of multi-family apartment buildings.

In construction of single-family homes – considered the core of the US housing industry – work on new housing rose in July by 8.3%, still a solid improvement over the previous two months.

In addition, the report noted that housing starts in July were 21.7% above the pace seen in the same month in 2013.

The housing market is a key downstream consumer sector for the chemicals industry, driving demand for a wide variety of chemicals, resins and derivative products such as plastic pipe, insulation, paints and coatings, adhesives and synthetic fibres, among many others.

The American Chemistry Council (ACC) estimates that each new home built represents some $15,000 worth of chemicals and derivatives used in the structure or in production of component materials.

The department also reported that building permits issued in July were at a seasonally adjusted annual rate of 1.05m, up by 8.1% from June and 7.7% ahead of July 2013.

But within the permits data, the report shows that contractors are planning more work on multi-family apartment projects, up by 23.6% in July, than in single-family housing, with permits there up by just under 1%.

Building permits are issued by local governments when contractors are ready to break ground and begin construction of a residential structure, so monthly permitting data is seen as an indicator of the housing sector’s near-term prospects.

The upturn in July housing starts comes as home builders report renewed confidence in the housing market, even though tight bank lending terms continue to restrict the sector’s struggling recovery.

US Housing Starts

* Seasonally adjusted & annualised

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy