Construction of new homes in the U.S. jumped almost 10% in January to an annual rate of 1.33 million. That’s the second highest level since the Great Recession and it easily exceeded the 1.24 million forecast of economists polled by MarketWatch.
Permits to build new homes also hit a 10 1/2-year high, rising 7.4% to an annual rate of 1.4 million.
What happened: Housing starts bounced back in January after a sharp decline in December tied to poor weather.
Building increased in the North, South and West. And two-thirds of the new units on which construction began were single-family homes, the bread-and-butter of the housing market.
Big picture: Housing starts are 7% higher compared to one year ago, reflecting a vibrant real estate scene that shows no sign of slacking off against the backdrop of the strongest economy in years.
The biggest problem? Demand for housing has continued to outstrip the number of properties available for sale, pushing prices higher and frustrating many would-be buyers.
Builders have responded in part by steadily increasing construction of single-family homes, a sign they have confidence in the economy. Stand-alone homes are almost always sold, rather than rented.
What they’re saying: “With home ownership turning higher for the first time in 13 years, a record-low number of single-family homes on the market, and builders more upbeat than during the housing bubble, residential construction should track higher regardless of what Mother Nature throws at it,” said Sal Guatieri, senior economist at BMO Capital Markets.
Stephen Stanley, chief economist at Amherst Pierpont Securities, noted that most of the starts gain came from multi-family buildings.
“The more reliable single-family starts figure posted a decent gain of 3.7% to 877,000 in January, in between the November blowout reading of 946,000 (which likely reflected a catch-up after hurricanes disrupted construction in September and October) and December hangover reading of 846,000,” Stanley said.
“To put the figure more in perspective, the 2017 average for single-family starts was 849K, so January’s level represents a continuing solid uptrend, especially considering that weather may have held activity down somewhat last month. The single driving fundamental in the housing market remains that demand is outstripping supply, so upside surprises on housing starts are just what the doctor ordered.”
Reported by MarketWatch (Feb. 16, 2018)
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