Hi everyone, this is
Jeff Rutt with some great news on the home front! This year has continued to be
a landmark year for the housing market in terms of recovery. This week there is
more good news that homebuilding has continued to remain strong and is even
growing. The article below from the Wall Street Journal discusses how
homebuilding has surged in the last month throughout the nation. One of the
most encouraging side effects of the housing surge is the opportunity it
creates not only for new homeowners but for unemployed individuals looking for
work. Not only does the increase in homebuilding provide more jobs, it also
helps to increase the amount of taxes being paid to local governments.
Hopefully progress in the housing market will continue and become a major
contributing factor to overall economic recovery.
Many Blessings,
Jeff Rutt
Home Building Surges as
Confidence Grows
Residential construction
picked up momentum in September and now is running at its highest level in four
years, a turn that could have a positive effect on the jobs market and the
broader U.S. economy.
Builders started work on
new houses and apartments at a seasonally adjusted annual rate of 872,000 units
last month, the Commerce Department said Wednesday, up 15% from August and 34.8%
from September a year ago, far exceeding economists' expectations. The level of
starts was the highest since July 2008.
Many economists contend
that the rise in construction, if sustained, could boost job creation and
economic growth. The National Association of Home Builders, a trade group,
estimates that each home built generates three full-time jobs and $90,000 in
new tax revenue.
"The path between
here and when we get to a sustainable pace of home building, should add,
cumulatively, up to two percentage points" to the nation's gross domestic
product, said Michael Feroli, chief U.S. economist at J.P. Morgan Chase &
Co. "It could take three or four years, but at the pace we're going at
now, we might get there sooner rather than later."
The government report
showed new building was up in three of four U.S. regions. Building rose 20.1%
in the West, 19.9% in the South and 6.7% in the Midwest. New construction fell
5.1% in the Northeast.
Some economists say a
continued rise in construction could further drive down the unemployment rate,
which fell to 7.8% in September from 8.1% in August. Between 2007 and 2011,
more than 2.1 million construction workers lost their jobs, according to the
Bureau of Labor Statistics, and since then, only 273,000 have been hired back.
The recent growth in
residential building "gives some hope in the coming months for more
construction jobs," said Anika Khan, a senior economist with Wells
Fargo WFC
+0.29%. "A lot of
construction workers are the ones who have been discouraged and underemployed,
on the sidelines. If these particular workers find work, it will have a big
overall economic impact, because it will boost wage and salary growth and
income growth."
In September, the number
of new building permits, an indication of future construction, rose 11.6% to an
annualized level of 894,000, also the highest level since July 2008.
Starts on single-family
homes, which made up 69% of housing starts last month, rose 11% in September to
a rate of 603,000 units, a 43% improvement from a year earlier.
The pop in home building
also suggests a divide between consumers and industry in the economic recovery.
While businesses
continue to hold back on big investments because of uncertainty surrounding the
coming elections and changes to the tax code, consumers' attitudes are
brightening, pushing up spending on goods such as new homes.
"Consumption
indicators seem to be pretty strong, while investment indicators seem to be
pretty weak," said Paul Ashworth, chief U.S. economist for Capital
Economics. "The fiscal cliff and what's happening in Europe should be
driving consumption and industrial numbers in the same direction. But in this
case, consumers don't seem to be as aware as businesses are."
Craig Perry, president
of Centerline Homes, a Coral Springs, Fla., builder, said in the past six
months he has started construction at three developments in Orlando and Broward
County in South Florida, and nearly all 136 homes in the communities are under
contract.
"We're seeing a
much better attitude among buyers," Mr. Perry said. "People feel like
home prices are rising, and mortgage rates are very low. So before prices rise
too high, people want to get in on it."
Another reason for the
jump in new-home construction is that inventories of previously owned homes and
foreclosed homes have declined, spurring some buyers to begin looking at new
properties.
The National Association
of Realtors reported last month that at the current pace of sales, it would
take 6.1 months to sell the listed supply of homes, down from 8.2 months of
supply a year ago.
This month, CoreLogic Inc., CLGX
-2.29%a real-estate data
company, said the "shadow inventory," or the pending supply of homes
that are delinquent or in foreclosure and could ultimately be listed for sale,
fell to 2.3 million units in July, or a supply of 6.0 months, down 10.2% from a
year earlier.
Ilin Misaras, who
coordinates international programs for students at North Carolina State
University, and her husband recently paid $500 to a builder in Raleigh, N.C.,
to reserve a piece of land for a four-bedroom house to be built next year. The
couple plans to pay about $245,000 for the home and aims to move in next
August.
Ms. Misaras, who is 30
years old, said she and her husband are watching their spending. They canceled
a trip to England, France and Italy to put the money toward their new home—but
they aren't worried about the economy.
"We are looking at
the economy, especially in our area, the Triangle, as skyrocketing right
now," Ms. Misaras said.
Once she gets a pending
pay raise and her husband finishes his studies to become a registered nurse,
she expects their household income will go up. "The stars are just kind of
aligned for us right now," she said.
While this year's
housing starts are up from a low of 478,000 in April 2009, they are still below
the historical average. Builders have started construction on about 1.5 million
new homes a year since 1959, to keep up with household formation which has run
at an average of 1.27 million new homes a year, according to Census data
analyzed by Moody's MCO
+1.44%Analytics.
"My gut tells me
it's the demographics kicking in," said Patrick Newport, an economist with
IHS Global Insight. "At some point, builders are going to have to ramp up
at a very steep rate. That's what's kicking in here. Construction has just been
depressed for too long."
Thanks again for reading, stay tuned for more
articles and comments-Jeff Rutt
