New home constructions in the U.S. went up by almost 16 percent in July marking the highest rise since November 2013, the U.S. Census Bureau revealed Tuesday.
Construction starts spiked 15.7 percent across states on a month-over-month basis. The increase comes after two months of consecutive declines. Construction of single-family homes was up 8.3 percent to 656,000, while that of multi-family buildings increased 28.9 percent to 423,000 - the highest since January 2006.
Building permits were also up 8.1 percent on a month-on-month basis. Permits of single-family home construction were up 0.9 percent to 640,000, while that of multi-family units rose 23.6 percent to 382,000.
New construction reportedly increased in all regions except in the mid-west, where building activity fell 25 percent. The steep spike in construction starts is due to the strong growth in the Northeast, which recorded a 44 percent increase in construction activity.
This strong rebound has surpassed Wall Street predictions. The improvement, especially in the multi-family segment, has been attributed to demand for long-term rental leases. A large number of Americans now prefer renting rather than buying and that is reflected in the latest construction report.
On the whole, experts are positive about the current pace of growth. Mortgage rates are still at its lowest, there are steady signs of price rises and the cost of living is also increasing at a capped speed. All the conditions are making for a buoyant housing market right now.
"The recovery remains on track, but we're not moving forward at a burning-hot pace," Laura Rosner, an economist at BNP Paribas in New York, told Bloomberg.
"The Fed has the luxury really to keep policy very accommodative and keep fostering economic growth and labor market improvement," Rosner added.
"What's turning around is businesses are just comfortable enough that...they need to start expanding some of their facilities," Kermit Baker, chief economist at the American Institute of Architects, told The Wall Street Journal.
"There's a lot more optimism out there."
