Future Looking Brighter for New Construction

March 20, 2012

U.S. housing starts dropped last month, though not in the region in which Chicago real estate lies.

According to figures released Tuesday from the U.S. Commerce Department, nationwide housing starts fell 1.1 percent in February to a seasonally adjusted annual rate of 698,000 units.

hand holding a hammerThe Midwest had the biggest increase in housing starts for the month, increasing 3.0 percent, while the South rose 1.5 percent, the West dropped 5.9 percent and the Northeast plummeted 12.3 percent.

Despite the overall drop, this was still the second-best pace of new construction since October 2008.

“Builders are reporting increased buyer interest and are expecting demand for new homes to improve in the coming months, but continue to exercise caution regarding new projects until that interest translates into more signed sales contracts,” said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB).

“This process is certainly being slowed by today’s overly tight lending conditions, the difficulty of obtaining accurate appraisals on new construction and competition from distressed properties that can make it tough for prospective new-home buyers to sell an existing home.”

Despite the obstacles, the data shows that the future has promise. Nationwide permit issuance, which can predict future building activity, jumped 5.1 percent to a seasonally adjusted annual rate of 717,000 units. That is the strongest pace since October 2008.

“NAHB’s most recent builder surveys have shown steady improvement in builder expectations for the next six months, and today’s report reflects that optimism in the permit numbers, which are up across the board and are typically the most statistically reliable data,” said NAHB Chief Economist David Crowe.

Builder confidence in the market for newly built, single-family homes remained at 28 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for March. The HMI is at its highest level since June of 2007.

“While builders are still very cautious at this time, there is a sense that many local housing markets have started to move in the right direction and that prospects for future sales are improving,” said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB). “This is demonstrated by the fact that the HMI component measuring builder expectations continued climbing for a sixth straight month in March, to its highest level in more than four years.”

Can’t wait to see what the rest of the year brings.

Categories: Economy, New Homes

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