Slow Going for Housing Starts
We’ve read a few places today that although housing starts were lower than expected for November, a recovering economy and wage growth should provide construction with a fresh push in the months ahead. But our director of research and education, Rosalind Greenstein, isn’t sure that will be true across the nation.
According to the numbers released by the Commerce Department this morning, November saw a decline in housing starts of 1.6 percent. Current data suggest an annualized rate of about 1.03 million new housing units in this country, which Greenstein said is consistent with the slow and steady economic recovery.
Greenstein said some housing markets still have a sizable inventory of vacant houses. These tend to be the places were the recovery is the weakest, and where wage gains will be the softest, she said. So an uptick in housing construction will occur more quickly in some places than others, she said. Where wages rise, more people enter the housing market, and with the threat of rising interest rates, that may happen more quickly, she said. But since first-time homebuyers often opt for existing houses over new construction, these new homebuyers won’t have a direct impact on housing starts, she said.
“The economy is improving, the labor market is tightening, but it takes a while for a housing permit to turn to a housing start. So, the trends are there, but the impact is felt slowly,” she said.
The market for multi-family construction is rising through most of the country, with multi-family units accounting for 38 percent of all housing starts in November. However, that sector declined in the South, she said. There is a limit to land available for construction, which contributes to demand for multi-family housing, and after the foreclosure crisis, there is additional demand from renters, she said.