In January, housing starts for one-family homes reached an annual pace unseen since July 2008, according to the Commerce Department . Builders broke ground on foundations for 613,000 single-family houses—0.8 percent higher than December’s 608,000 unit annual projection.
The numbers for total housing starts did not fare as well. A 24.1 percent downturn in multifamily starts dropped the number of units to an annual rate of 277,000 and total housing starts to 890,000 units.
Bloomberg economists predicted a median rate of 920,000—with figures ranging from 870,000 to 1 million units. The Commerce Department revised December’s housing starts up—from 954,000 to 973,000. This pace exceeded the median projection of 920,000.
Construction activity rose in the West and South regions, 16.7 percent and 4.1 percent respectively. Building construction in the Midwest region declined 50 percent. Housing starts in the Northeast plunged 35.3 percent.
The decline in the total number of housing starts represents a “correction from the strength we saw earlier,” said 4Cast Inc. (New York) senior economist Sean Incremona. According to data tabulated by Bloomberg, this New York-based firm has the best accuracy over the last 24 months when it comes to predicting housing starts data.
Housing starts a key to economic growth
Even with the lower total annual rate, major builders like Lennar and PulteGroup believe the strong showing in the single-family home segment in late 2012 will continue through 2013.
Gus Faucher, the senior economist for PNC Financial Services Group Inc. (Pittsburg) said the “most importation” indicator to track the growth of the economy is the single-family home starts. New home construction creates jobs and economic expansion.
The three largest homebuilders in the U.S., based on market value, report that the number of orders for new homes increased in the most recent quarter for data released reported. The CEO of PulteGroup, Richard Dugas says in an earnings call that a combination of factors points to an even better year for builders than 2012:
- Low mortgage rates
- Increases in rental rates
- Rising home prices
- Low inventory levels
The above elements have motivated many potential home buyers who have been sitting in the fence to enter the market to buy a home. Many builders expect this foot traffic to continue.
To fuel the momentum of the housing market recovery, many builders emphasize the need to create more jobs and for mortgage lenders to implement more reasonable credit underwriting standards.
Permits activity encouraging
Applications for permits also climbed to the highest rate since June 2008 with 925,000 permits. The median estimation came in at 920,000. When applications for new homes exceed housing starts, it indicates strength in the residential construction segment of the housing market.
The latest data on household formation also have developers looking to invest capital in apartment complexes. Lennar (Miami) has plans to build $1 billion in multifamily construction projects. Luxury homebuilder Toll Brothers will start construction on a series of high-end dormitories for college students.