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.
- In a mild disappointment, Census reported 890,000 starts in December, an increase of 23.6% from a year earlier, but an 8.5% decline from an upwardly revised December figure.
- Starts are important as construction is highly correlated with job creation and directly impacts housing supply.
- Single family construction, which has lagged for several years in the wake of the subprime crisis and subsequent bloat in inventory, managed to defy the headline decline in starts with a modest 0.8% increase from December figure and is 20% higher than a year ago.
- Permits for construction of single family units rose 1.9% from December to January and are 29.2% higher than a year earlier.
- While housing starts are strong, they remain well below the historic average and should not pose a threat to inventories as much of the building is done in niche markets and inventories have fallen sharply in recent quarters. Builder and lender confidence in local conditions is a positive indicator for inventories, sales volumes, and price trends in these markets.
- Furthermore, new construction and the economic multiplier that it generates will help to spur further job creation and income growth.