Home building pace picking up
U.S. housing starts in July hit level not seen since ’07
WASHINGTON – U.S. builders started work on single-family houses last month at the fastest pace since the Great Recession began in late 2007.
Housing starts in July rose 0.2 percent to a seasonally adjusted annual rate of 1.21 million homes, the Commerce Department said Tuesday. Construction of single-family houses accounted for all of the gains, shooting up 12.8 percent last month to the highest rate since December 2007.
The increase pointed to a housing market that has strengthened for much of the year, reflecting an increased sense of financial security for many Americans amid steady job growth, modest layoffs and relatively low mortgage rates. Continued gains in housing would help extend the current economic expansion.
“More housing starts means more construction jobs as well as confidence from real estate developers that people will be buying,” said Tara Sinclair, a George Washington University professor and chief economist for job site Indeed. “We’ll know the economy is really hitting stride when we see these starts in the range of 1.5 million.”
Total housing starts have risen 11.3 percent year-to-date. The market is attracting more buyers and renters, as starts for apartment buildings have climbed 12.2 percent so far this year despite last month’s drop.
But Tuesday’s report also showed the potential limits of further gains from new construction as the number of building permits fell, a possible sign that demand will need to continue improving to further the pace of homebuilding.
“It is in all likelihood going to take another leg up in new single-family home sales to sustain the pace of single family starts that was recorded in July,” said Joshua Shapiro, chief U.S. economist at the consultancy MFR.
Approved building permits decreased 16.3 percent in July to an annual rate of 1.12 million, after achieving an eight-year high in June.
The decrease likely reflects some pullback after months of gains and was caused primarily by a sharp plunge in permits to construct apartment complexes after a tax break expired in New York.
Homebuyers and renters have crowded into the housing market this year, pushing up prices to levels that have worsened affordability and placed a potential cap on sales growth.
Builders have relieved some of this financial pressure by ramping up construction, yet the increases in housing starts and building permits still lags the surging demand.
Only 5.4 months’ supply of new homes is available, compared to six months in a healthy market.
In the rental sector, prices are increasing at double the rate of hourly wage growth largely because of fewer vacant apartments available. Home rental prices are up 4.3 percent in the past year, according to the real estate firm Zillow. Average hourly earnings have improved a mere 2.1 percent.
Developers are addressing the recent shift to rentals as more baby boomers start to downsize and millennials rent longer before buying their first homes.