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Housing Starts

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses housing starts.

  • New home construction activity continues to improve with good gains in June.  Housing starts rose 7% to now 760,000 (annualized rate).  This time last year, the figure was 615,000. Both single-family units and multifamily units made gains.
  • Though the bottoming in housing starts occurred in 2009 with only 550,000 housing starts, the pace of recovery since that time has been very sluggish.  Sharper gains are occurring this year, already up 25% year-to-date, and even bigger gains could occur next year because the inventory levels have fallen to very low levels.
  • Based on the historical average of the U.S. population growing by about 3 million people each year, housing starts have been 1.5 million a year on average.  However, the deep downturn after the bubble years has resulted in 1.5 million housing construction over a long 3-year time span from 2009 to 2011.    There is clearly pent-up demand ready to hit the market.  Do not be surprised if housing starts rise by 50 percent in 2013.  Note that even with such a large percentage increase, housing starts will only be 1.15 million units, still below the normal 1.5 million historical average.  If housing starts rise at a slower pace, then home prices will perk up at a faster rate.
  • One unwelcome development in the nascent recovery in homebuilding is that many of the smaller builders have been shut out from participating.  Construction loans are very hard to obtain.  As a result the big homebuilders with the ability to tap Wall Street funds and issue bonds are the ones taking advantage of recovery over the smaller players (just like big banks getting bigger while smaller banks experiencing difficult conditions).  Less competition will mean somewhat higher home prices for consumers to buy a newly constructed home.

Lawrence Yun, PhD., Chief Economist and Senior Vice President

Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.

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Comments
  1. JT

    I don’t know what world you are living in but the chart that shows the “inventory of new single family houses” is WAYYY off. I can take you to many parts of my area and show you tons and tons of new houses sitting there empty…TONS.

    The market is not what you or anyone is painting the picture of it to be…the market is terrible, just ask all the Realtors that are no longer in business….

  2. Shannon

    I don’t know where JT lives but our market is showing significant signs of improvement in both existing and new construction here in Utah. Not only from pent-up demand, but also first-time home-buyers finally taking advantage of the low prices and low rates with nothing to be afraid of. Also you got to think of the people who lost their homes in 2007, 2008, and 2009 and have waited the required number of years before they can buy again and their credit scores have been repaired and now entering the market again and taking advantage of the affordability right now too. Obviously a nationwide statistic isn’t going to be a “one size fits all”, however, there are are some pocket areas doing better than the average and some like JT’s who are doing worse.

  3. The housing market in my area of Montana is being compared to 2006. We are actually seeing multiple offers coming in on homes and some are selling for more than they were listed.
    New construction has picked up from the last 2 years. In my own subdivision I look out my window and see 4 new homes being built. The subdivision next to us has over 10 new houses going up and they are selling!
    We are experiencing a slow change from a buyers market to a sellers market.