Good News for Middle-Class Home Buyers

Jun 4, 2015

You’ve heard the news that the housing market is on fire, but here’s some more: The number of permits issued for new houses is smoking, too. The Census Bureau released data on Tuesday morning that housing starts rose 20.2% from March to April, to a seasonally adjusted annual rate of 1.14 million. That’s 9.2% higher than a year ago andthe biggest monthly bump since November 2007. Starts for single-family homes were up 16.7%, while starts for multifamily homes, with five units or more, rose 31.9%.

Might that loosen up this crazy tight market? Our chief economist, Jonathan Smoke, thinks it just might. “This increase in single-family starts in April should bode well for a significant increase in new-home sales in April as well,” he said. “We should see stability in multifamily but a return to growth in single-family that outpaces multifamily.”

Much of that growth for single-family homes could be in more affordable homes. “That is the segment of the market that builders moved away from in recent years, but is where the volume potential resides,” said Smoke. “We should be seeing a relative slowdown in new-home prices as more affordable homes are introduced into the mix.”

Here’s the difference between housing being built today and before the crash, and why this ballooning of housing starts does not a bubble make. New construction, said Smoke, is contract-driven now, as opposed to the massive pre-crash development built on spec. Builders likely wouldn’t start homes without a contract in place. Read full article here.