Recently I read that home construction increased last month and applications for building permits also grew. The gains were driven mainly by apartment and condominium construction, not the much larger single-family homes sector.
Construction of new homes and apartments rose 10.5% in August from a month earlier to a seasonally adjusted annual rate of 598,000. That’s the highest level since April.
Pulling the figures up was a 32 % monthly increase in the condominium and apartment market, a small portion of the market. Single-family homes, which represented about 73% of the market in August, grew more than 4%.
Housing starts are up 25% from their bottom in April 2009. But they remain 74% below their peak in January 2006. Single-family housing starts are up 11% from their low point in January 2009, but down 78 % from their peak in January 2006.
Builders are struggling with weak demand for new homes caused by high unemployment and a glut of foreclosed homes on the market. They benefited in the spring from federal tax credits, but those expired in April.
Paul Dales, U.S. economist with Capital Economics, has said the high number of vacant homes, mounting expectations of renewed price falls and economic constraints on households will continue to weigh on the industry. Adding that homebuilding activity remains at an astoundingly weak leveland that construction has to be more than double current levels for the market to be considered healthy.
Building permit applications, a sign of future activity, grew by nearly 2% to an annual rate of 569,000.
It’s been a tough summer. As September comes to a close, we’re seeing a little bit of pickup in traffic, but according to investors, that shouldn’t be cause to have a sigh of relief at this point.
Construction activity rose 34% in the West and was up 22% in the Midwest and 7% in the South. However, construction fell by 24% in the Northeast.
Most recently, the National Association of Home Builders said its monthly index of builders’ sentiment was unchanged in September at 13. The index has now been at the lowest level since March 2009 for two straight months.
Michael Caruso, Broker ABR ABRM CRB CRS GREEN GRI
2007 President, Orange County Association of Realtors (949) 753-7900