Homebuilders broke ground at the fastest pace in eight years. A fresh supply of new homes will therefore reach the market in upcoming months to help relieve the inventory tightness. There is no need to worry about an oversupply. Even more production would be welcomed.
Specifically, housing starts reached 1.21 million in July. Single-family units advanced solidly, up 19 percent from one year ago. Multifamily units fell slightly, by 3 percent from one year ago. Despite these one month trends, it is multifamily construction that is pretty much back to normal while the single-family construction need to rise by another 50 percent to be back to normal.
Before housing starts can occur a permit needs to be obtained. In July, permits retreated after having jumped hugely in the prior month. The trend overall, aside from normal month-to-month volatility, is for a meaningful increase to new home construction in the months ahead. Housing starts are expected to surpass 1.1 million for all of 2015 and then further rise to 1.3 million in 2016.
People want walkability and the builders are responding to this demand. Multifamily units can be apartments or condominiums. And these high-density buildings are the ones rising faster than single-family homes in the suburbs. This growing walkability preference, aside from enhancing people’s health, also hints that office demand will greater for downtown spaces with walkability than office spaces out in distant suburbs. Employers will pay more in rent in downtown, but will likely have an easier time recruiting and retaining good workers.
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.