House Construction Stepped Up in August
The pace of house construction stepped up in August, based on data from the U.S. Commerce Department. Construction of new houses and apartments increased by 1.5 percent to an adjusted yearly pace of 598,000 units in
August, with multifamily buildings contributing substantially to the growth. The adjusted annual increase was slightly below the 600,000-unit rate predicted by economists and lower by over 70 percent than the peak rate in 2006.
The number of building permit applications also increased in August by 2.7 percent to an adjusted yearly pace of 579,000 units, just a thousand below the 580,000 units predicted by economists. Permit applications for single-family houses declined by 0.2 percent while applications for multifamily units increased by 15.8 percent.
The increase in house construction in August, which followed a slight decline in July, was driven largely by the more than 25-percent surge in multifamily construction, which experienced a 15.2-percent slowdown in July.
The house construction sector that declined in August was the large single-family housing sector, which dropped by 3 percent to an adjusted yearly pace of 479,000, its first drop after five consecutive monthly increases.
Capital Economics economist Paul Dales said that new construction data remains 74 percent lower than the peak in 2006 and that housing recovery may take a longer time.
In contrast, Joel Naroff of Naroff Economic Advisors said that new construction will contribute significantly to nationwide economic recovery.
In the Northeast, home construction increased by 23.8 percent and in the Midwest, construction rose by 0.9 percent. Construction declined in South by 2.4 percent while it remained unchanged in the West.
Since the housing downturn, home builders have been cutting down their construction activities, but now that first time home buyers are looking for new homes to buy to take advantage of the federal tax credit, builders have returned to the market.
According to the National Association of Home Builders, the housing market index increased by one point in September to 19 points, indicating growing optimism among home builders. The index reading was the highest level reached since April last year.
Share prices of home builders also increased as home building firms reported improvements in their financial results. The stocks of Beazer Homes USA and Hovnanian Enterprises rose by over 6 percent this week.
Additionally, the Dow Jones House Construction Stock Market Index also rose since falling to its lowest level in November last year.
