Thursday
December 18, 2014

Builders Ramp Up Production to Meet Increasing Demand

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Builders Ramp Up Production to Meet Increasing Demand

Housing starts rose 6.8 percent in May, as low inventory levels have builders rushing to catch up with demand. Housing starts rose to a seasonally adjusted annual rate of 914,000, nearing the 1 million mark, the Commerce Department reported Tuesday.

Most of the surge was due to increased production in multifamily housing. Multifamily home starts rose 21.6 percent while construction for single-family homes increased 0.3 percent in May. Housing permits for single-family homes, a gauge of future construction, rose 1.3 percent in May. 

"Unusually wet weather across much of the country likely dampened the pace of single-family production in May," says David Crowe, chief economist of the National Association of Home Builders.  "Nevertheless, the strength in permit issuance for single-family units -- and stockpiling of permits for future use -- provides further evidence that housing continues on a slow and steady path to recovery."

Regionally, housing construction rose the most in May in the South -- up 17.8 percent -- followed by a 5.7 percent gain in the West. Housing starts declined 13.7 percent in the Midwest in May and 9 percent in the Northeast. 

Low inventories are pushing up home prices. CoreLogic reports that home prices are up 12.1 percent in April year-over-year.

Source: National Association of Home Builders, “May's Housing Starts Fall Short of Predictions but Hit 5-Year High,” Reuters (June 18, 2013) and “Housing starts up 6.8% in May,” USA Today (June 18, 2013)

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