Friday, January 18, 2013

Five Facts on the Housing Construction Rebound

by Nick Timiraos
The Wall Street Journal

Housing construction ended 2012 on a high note, with new units in December rising 12% from November and 37% from a year ago.

The boom in construction shouldn’t be too surprising, given that permits have risen in recent months and that builder confidence has risen. But it is a clear indication that rising household formation and sharp drops in the number of homes for sale are finally benefitting home builders. Five facts help to put today’s report in context:

1. Multifamily housing starts accounted for the highest share of overall housing starts, at 30%, since 1986, when the U.S. experienced overbuilding in the apartment sector. Of course, back then, there were more than double the number of apartments being constructed. (The multifamily share of construction fell to just 15% in 2005, the peak year of new home construction).

2. Multifamily construction in 2012 was more than double the rate of 2009 and 2010 combined, at 233,400 units. But that was still lower than any year between 1995 and 2008.

3. Single-family housing starts ended the year at 535,500, which is the fourth lowest since record keeping began in 1959, but a hefty 24% above last year’s level, which was the lowest on record. In other words, construction is very low, but it is beginning to pick up the pace.

4. December’s rate of new construction, which hit a seasonally adjusted annual level of 954,000 total units and 616,000 single-family units, stood at the highest level in 4½ years. Still, the single-family starts figure was below that of every month between June 1982 and June 2008.

5. New housing unit completions are up only 11% from 2011, notes Jed Kolko, chief economist at Trulia, which is below the 28% gain in new construction starts. “That means many of the homes started in 2012 won’t be completed until 2013,” 

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