US housing starts increased in June, surpassing expectations of a modest pullback. Housing starts rose by 25,000 units to 1,211k (annualized), as compared with expectations to a decline to 1,180k. But the earlier two months’ data was downwardly revised, subtracting 10,000 units from the overall tally. Most of the increase was seen in the multifamily segment that recorded a rise of 21,000. The rate of single family homebuilding also increased modestly in June by 4,000.

Meanwhile, building permits dropped 1000 units to 1,152k (annualized), the first decline after rising for three straight months. In the multifamily segment, permit rose 26,000; however, the rise was more than countered by a pullback in single family permit applications by 27,000.

The report released yesterday is a strong one with both starts and permitting activity being close to post-recession highs, said TD Economics in a research report. Despite the likelihood of a modest pullback after June’s solid rise, construction activity kept on rising in July, supporting the view that US homebuilding is on an upward trajectory, with the rate of housing starts quite above the six month and twelve month moving averages, added TD Economics.

The near-to medium-term homebuilding outlook continues to be favorable and is underpinned by the recent recovery in the NAHB’s housing market index that rose to a seasonally adjusted level of 60 in July following a modest drop in the earlier month. Historically low mortgage rates, along with strengthening labor market are underpinning the continued recovery in housing.

“We expect housing to remain a key support for the ongoing U.S. economic recovery which we view as resilient”, noted TD Economics.