Home Development Reaches Key Milestone

Increased home development in recent months has affirmed suspicions that that housing sector continues to improve. For the first time in approximately five years, housing starts have showed signs of a potential rebound with numbers surpassing one million. Drastic increases in housing development can be seen in statistics comparing this months rates to that of a year earlier. March witnessed an annual rate of 1.04 million homes being built, up seven percent from the previous month and 47 percent from this time last year.

The recent spike in housing construction may be attributed to the development of multi-family structures (apartment buildings and condominiums). Respective development skyrocketed by 27 percent from February and 82 percent compared to the previous year.

Single-family homes have experienced a modest increase in developmental startup as well. Thanks in part to near-record low mortgage rates, lower unemployment and a drop in foreclosures that have elevated home prices; more single-family homes are being built. Increases in new home development have served to stimulate the economy by simultaneously expanding the sale of new and previously owned homes.

Expectations should be tempered because of a recent six percent decline in the development of single-family homes. A concern surrounding the rising prices of raw building materials and a distinct shortage of construction workers has served to slow stimulation. As a result, builders filed for fewer building permits in March, with the annual rate slowing by four percent to 902,000.

“The trajectory for the single-family market continues upward, but builders appear to be struggling with credit issues for lot development and rising construction costs,” said Mark Vitner, senior economist at Wells Fargo Securities.

According to David Crowe, the chief economist for the National Association of Home Builders (NAHB), the increase in costs and labor shortages may be to blame for the six percent decrease in home starts for March. “Plywood and particle board are twice as expensive as a year ago. Lumber is up 50 to 60%. Drywall, up 40%,” he said. Crowe reiterated that this recent decline is “not a downturn in building as much as it is a slower recovery than we would otherwise expect.”

More importantly, a recent increase in the demand for housing may spur the need for workers and materials. Russell Price, a senior economist at Ameriprise Financial Inc., has estimated that the recent demand for housing may generate as many as 500,000 jobs in 2013 and 700,000 in 2014. Equally as promising, are statistics that acknowledge the construction industry has accounted for 15 percent of the overall job growth in the past six months.

According to Freddie Mac chief economist Frank Northaft, “Housing construction is starting to pick up, but is well below historical averages. Supported by low mortgage rates, we expect more homes to be built in 2013 than in any year since 2007.“

While the balance remains fragile, low interest rates and high housing prices could serve to stimulate the economy. A continuation of current trends could feasibly produce the first year in which the housing sector actually contributes to the economic recovery, rather than hinder it.

🔒 Your information is secure and never shared. By subscribing, you agree to receive blog updates and relevant offers by email. You can unsubscribe at any time.
Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies

Loans For Flipping Houses

By Paul Esajian
Real Estate Investing Strategies
Real Estate Investing Strategies