Housing Construction Boom Begins This Year?

Daily Real Estate News | Monday, June 22, 2015

New-home construction may finally be on the mend: Housing permits, a gauge of future homebuilding activity, are at a post-crisis high.

A Strong Showing for Housing

Last week, the Census Bureau reported that new housing permits were up by more than 11 percent from April, reaching a post-crisis high of 1,275,000.

Since the housing crisis, analysts have been waiting for population growth to once again boost demand for construction. Housing starts have remained well below pre-crisis norms for years.

But that turnaround may be now.

In recent commentary, Jonathan Smoke, realtor.com®’s chief economist, notes: “The increasing level of new construction is entirely consistent with the strong demand and corresponding price gains we have been seeing in both rents and home prices … Builders are more confident as a result of seeing more traffic.”

Smoke notes that the last time the housing market index from the National Association of Home Builders, which measures builder sentiment, was this high was in 2005, the height of the housing bubble.

John Burns, CEO of John Burns Real Estate Consulting, says in recent commentary that a turnaround is critical in homebuilding to meet growing household formations.

“Even with the most conservative of assumptions, household formations will boom over the next 15 years, and we will need well in excess of 1.5 million homes built per year to meet the demand,” Burns says. “That is 50 percent more than we built last year.”

Source: “2015 Is Finally the Year of the Home Construction Boom,” Fortune (June 16, 2015) and “New Construction Is Gearing Up for a 15-Year Boom. Who’s Ready?” John Burns Real Estate Consulting (June 17, 2015)

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