U.S. housing starts rebounded strongly in June and building permits surged to a near eight-year high, pointing to a rapidly strengthening housing market.
Groundbreaking increased 9.8 percent to a seasonally adjusted annual pace of 1.17 million units, the Commerce Department said on Friday.
May’s starts were revised up to a 1.07 million-unit rate from the previously reported 1.04 million-unit pace.
Economists polled by Reuters had forecast housing starts increasing to a 1.11 million-unit pace last month.
Rising household formation as a tightening labor market encourages young adults to leave parental homes is boosting demand for housing, especially apartments.
Permits for future home construction increased 7.4 percent to a 1.34 million-unit rate, the highest level since July 2007. Permits have been above a 1 million-unit pace since July.
A survey on Thursday showed builders’ confidence held at a more than 9-1/2-year high in July, suggesting that both permits and groundbreaking have scope to rise further. Economists anticipate that the housing market will mitigate the drag on the economy from a struggling manufacturing sector.
While groundbreaking for single-family homes, which account for the largest share of the market, slipped 0.9 percent to a 685,000 unit pace, that reflected a big drop in the Northeast.