Industry Update: Hang On, It’s a Bumpy Ride

Industry Update: Hang On, It’s a Bumpy Ride

Posted 10/16/2013

new-home-under-construction_lThe housing market recovery continues to lurch forward with more twists and turns than a roller coaster ride at the state fair.

As the National Association of Home Builders reported in September, underlying market fundaments are mixed, though generally moving in the right direction. Housing starts underperformed compared to the overall NAHB/Wells Fargo Housing Market Index last month, but many experts appeared unconcerned.

A similar disconnect occurred in 1991, when builders’ sentiment doubled in four months while single-family starts rose only by one-third. The current Housing Market Index is about 50 percent greater than last year’s, while single-family housing starts are only 15 percent ahead for the same time period. If history repeats itself, industry sources believe housing starts and builder sentiment will eventually reach a balance.

With August single-family permits reaching a 627,000 pace – the highest since May 2008 – analysts remain confident that more growth is on the way, particularly with the help of pent-up housing demand.

“The solid single-family starts and permits report provides additional evidence of the slow but steady improvement in single-family owner-occupied construction that began in earnest in early 2012,” states the NAHB’s Eye on the Economy report.

Although the seasonally adjusted construction rate has increased 36 percent since January 2012, single-family starts remain at less than half a normal rate of 1.4 to 1.5 million per year. NAHB is forecasting a 17 percent increase in single-family construction in 2013 over 2012 and a more robust 31 percent in 2014.

Photo credit: ArmchairBuilder.com / Foter / CC BY