Homebuilders have a sunny outlook as we leave summer behind and winter bears down. Why? Today we learned that construction of single-family homes is picking up, but just barely. Building permits are down.
Builders might be a glass-half-full crew, but we’ll take this small increase in new construction as good news, too. It’s at least a step in the right direction, especially as we enter the seasonal slowdown.
Every month, the Census Bureau tells us how many houses and apartments are being built. More construction, especially on single-family homes, is generally good news because it means more jobs, more consumer spending, better economic growth and more options for house hunters.
Last month, residential construction jumped 6.5 percent to a rate of 1.2 million units a year, the second-highest level since 2007. But that was mostly apartments. Improvement in single-family construction was almost imperceptible, at 0.3 percent.
Worse, fewer builders applied for permits, suggesting that home construction might slow in the coming months.
“Home construction continues to improve but there is still a long way to go before we get back to a normal housing market,” said Joel Naroff, president of Naroff Economic Advisors Inc. “With millennials starting to form households at a growing pace, the demand for shelter should only increase.”
When there aren’t enough new homes, things can get nutty. Last month, hopeful homebuyers in McKinney, Texas, camped out overnight to get a chance at a few pre-construction lots.
Yesterday, homebuilders reported their highest level of optimism in a decade, with the NAHB/Wells Fargo Housing Market Index jumping three points (a lot). That’s good, because there aren’t enough houses for all the buyers out there, and that’s pushing up prices. Watch this space on Thursday, when we’ll report September sales and prices.
Thinking about buying a newly constructed home? Check out our 10 tips for getting a better deal when buying new construction.