October 21, 2016

More New Homes Are Coming Soon

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More New Homes Are Coming Soon

Builders are beginning work on more single-family homes across the country, which could offer some much-needed inventory relief for many housing markets. Housing starts nationwide are up nearly 31 percent year-over-year.

Read more: A Troubling Shortage of Homes

In February, housing starts jumped 5.2 percent alone on a month-over-month basis to a seasonally adjusted annual rate of 1.178 million units, the Commerce Department reported Wednesday. Broken out, single-family production rose 7.2 percent month-over-month to 822,000. That is the highest level since November 2007. Meanwhile, multifamily starts mostly held flat last month.

“It means that home builders are responding to the demand out there,” says Jonathan Smoke,®’s chief economist, about the new report. “We don’t have enough supply of homes to keep up with the increase” among a growing number of buyers entering the market.

All four regions of the U.S. posted gains in housing starts last month, except the Northeast. The West posted the largest month-over-month gain as new-home starts climbed 26.6 percent, followed by a 19.9 percent increase in the Midwest, and a 7.1 percent rise in the South. The Northeast, on the other hand, posted a 51.3 percent month-over-month decrease in February.

Overall, "February's single-family gains indicate that this sector is strengthening in line with our forecast," says David Crowe, chief economist of the National Association of Home Builders. "As the U.S. economy firms, job creation continues and mortgage interest rates remain low, we should see further growth in housing production moving forward."

However, the number of new permits – an indicator of future building – did post a drop in February compared to January. That could signal at least a temporary slowdown.

Permits fell 3.1 percent in February month-over-month, but most of that was attributed to an 8.4 percent drop in multifamily permits. Single-family permits inched up 0.4 percent to 731,000 in February.

A turnaround is likely coming to the Northeast, with permits rising 40.4 percent in February. On the other hand, the Midwest posted an 11.4 percent decrease in permits, the West saw a 7.2 percent decrease, and the South had a 4.4 percent drop in permits.

Source: National Association of Home Builders and “Good News for Buyers: More New Homes Are in the Pipeline,”® (March 16, 2016)