Housing Starts Take a Nose-Dive After Months of Promising Development.
Activity in the Residential New Construction arena has been disappointing of late. With residential resale inventory down and rental prices up, the real estate industry relies heavily on new construction to fill housing gaps.
New construction completions are slow, due in part to a lack of contract hires. An average time-line for purchase contract to completion is somewhere in the vicinity of eight months. This is a deal breaker for many home buyers who are unable or unwilling to obtain a short-term rental, while home sellers are reluctant to accept a purchase contract with a contingency that the buyer must first sell their current home.
Housing starts dropped according to new statistics from the U.S. Census Bureau and the Department of Housing and Urban Development. These lower numbers follow year-long highs and an extreme surge in Fall of 2016.
Andrew Soergel, Economy Reporter for US News and World Reports writes: The construction industry managed to create 11,000 new jobs in May, according to the Bureau of Labor Statistics. But in the two months prior, job creation was either flat or declining.
Construction outfits burned by the housing bubble and subsequent Great Recession are still reluctant to go gangbusters on home construction nearly a decade after the financial crisis began. Hiring has been modest at best in recent months, and the lack of new starts and permits doesn’t point to an immediate turnaround.
Privately-owned housing starts were at a seasonally adjusted annual rate of 1,090,000, a disappointing 18.7 percent drop from the revised estimate of 1,340,000.
While starts may look bleak, privately owned housing completions rose to a seasonally adjusted annual rate of 1,216,000, 15.4 percent. Single-family housing completions rose slightly as well.
“Because of the lack of progress in new construction this year, housing stock has not kept pace with household growth,” says Smoke. “And that’s why low vacancies in rentals and very low inventories of homes for sale lead to higher rents and prices. Now that permitting once again exceeds the rate of starts, we can expect better growth ahead in starts and completions. Yesterday’s homebuilder confidence data pointed to a big post-election jump in builder confidence. Let’s hope that means new construction is finally growing again.”
For more information, visit https://www.census.gov. Reprinted with permission from RISMedia. ©2016. All rights reserved.
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Bill Salvatore / Arizona Elite Properties
Residential Sales, Marketing, and Property Management
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