Categories: New Homes Chicago, New Homes Madison, New Homes Milwaukee | Posted: May 25, 2015
Home construction thawed in April as housing starts surged.
The U.S. housing sector was in full bloom in April, as construction during the month revved up to its fastest pace since before the Great Recession.
New privately owned housing starts – a category that includes single-family and multiunit housing – rose to a seasonally adjusted rate of 1.14 million, according to data from the U.S. Census Bureau and Department of Housing and Urban Development. Up 20.2 percent month over month, it was the sector’s largest monthly gain since November 2007 and represented a 9.2 percent jump year over year.
Housing construction was sluggish during a particularly rough winter, especially in the Northeast and Midwest. And the numbers didn’t rebound markedly in March, making some analysts anxious for April’s numbers.
The uptick is good news for a housing sector that has largely lagged behind the rest of the economy. It’s also a good sign for domestic construction, which shed nearly 30 percent of its employees between April 2006 and January 2011 but has since gained steadily, according to the Labor Department.
Single-family housing starts in April were up 16.7 percent month over month, while construction of buildings with at least five units jumped nearly 32 percent.
“The share of multifamily apartment buildings, in simple terms, is a whole lot greater than normal,” David Blitzer, chairman and managing director of the S&P Dow Jones Index Committee, said in an interview last month with U.S. News. “A lot of the multifamily construction is going into rental buildings.”
Rental vacancy rates continue to hover near all-time lows as strong demand for temporary housing pushes prices through the roof. The homeownership rate in April, meanwhile, sunk to its lowest level since 1993 as consumers continue to shy away from buying a home.
“What I fear has set in is a negative dynamic where those rents are so high and income growth has been so tepid that people can’t accumulate the savings for the down payment and the closing cost in order to effect that transition from the rent line into the ownership line,” Stan Humphries, chief economist at Zillow, told U.S. News in a recent interview. “That has left more people in rental housing than has been the case, normally.”
But the sharp uptick in multiunit homes could alleviate some of the price pressures in particularly saturated markets. With more apartments available for rent, people will have more options, which could make pricing a more competitive game for rival building owners.
The number of rental buildings with at least five units that were completed in the month of April was up nearly 40 percent over March and a full 28 percent year over year.
Meanwhile, single-unit construction rebounded particularly well in two regions where construction was severely crippled by inclement winter weather, with the number of new single-unit houses started in April up 43.2 percent month over month in the Midwest and 24.4 percent in the Northeast.
The number of total completed houses was up 73.3 percent in the Northeast and 82.5 percent in the Midwest month over month.
Such marked April gains may not hold up long-term, considering an index released Monday by the National Association of Home Builders and Wells Fargo saw builder confidence drop off in May.
The Housing Market Index in May was up 20 percent year over year but shed nearly 4 percent from April. The index surveys builders’ perception of current sales conditions and buyer traffic (both of which scored more negatively in May than in April), as well as sales expectations over the next six months (which ticked up slightly from April).
“Consumers are exhibiting caution, and want to be on more stable financial footing before purchasing a home,” David Crowe, chief economist at the National Association of Home Builders, said in a statement accompanying the index. “On the bright side, the HMI component measuring future sales expectations has been tracking upward all year, mortgage rates remain low and house prices are affordable. These factors should spur the release of pent-up demand moving forward.”
By Andrew Soergel May 19, 2015: US NEWS