More housing inventory on the way; construction, builder confidence up for February

Aly J. Yale
Aly J. Yale
The Mortgage Reports Contributor
February 19, 2018 - 2 min read

All signs are positive

Could our housing inventory woes be on the way out? According to new data from the U.S. Department of Housing and Urban Development, the Commerce Department and many of the nation’s top homebuilders, it very well could be.

Housing starts rise – particularly in Northeast

Data from HUD shows single-family housing starts rose 3.7 percent in January, hitting 877,000 units for the month.

According to the Robert Dietz, chief economist for the National Association of Home Builders, demand for new construction is up – and rising income might be what’s fueling it.

“Demand for owner-occupied housing is rising due to favorable demographic tailwinds and a healthy labor market,” Dietz said. “Increases in after-tax incomes should help prospective buyers save for a downpayment on a home. As consumers continue to enter the single-family market, we should see builders increase production to meet this demand.”

Home construction spending rises; could it impact home prices?

The Northeast saw particular growth, with a rise of 45.5 percent across both single- and multifamily construction over the same period. Starts rose 10.7 percent in the West and 9.3 percent in the South. The Midwest was the only region to see a dip in construction.

Builders get more confident

As demand continues to rise for new construction, America’s home builders are getting more confident. According to NAHB’s most recent Housing Market Index, builder confidence is at a “healthy 72 level” for February.

Builders are particularly optimistic about future sales, Dietz said.

“The HMI gauge of future sales expectations has reached a post-recession high, an indicator that consumer demand for housing should grow in the months ahead,” Dietz said. “With ongoing job creation, increasing owner-occupied household formation, and a tight supply of existing home inventory, the single-family housing sector should continue to strengthen at a gradual but consistent pace.”

They’re also confident in buyer traffic levels and current sales conditions, according to the index.

How to choose a home builder and get the house you want

Despite the optimism, however, NAHB’s chairman Randy Noel said there are still some challenges builders need to overcome as the year goes on.

“Builders are excited about the pro-business political climate that will strengthen the housing market and support overall economic growth,” Noel said. “However, they need to manage supply-side construction hurdles, such as shortages of labor and lots and building material price increases.”

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