In 2009, new homebuilders experience their worse year ever, with just over 554,000 housing starts-- a 50-year low. Last year, local municipalities recorded 587,000 housing starts. The good news for November is the number of groundbreaking for home starts finished at its highest level in two years. With interest rates at record lows, housing start sped up to 685,000 for the month of November-- a 9.3 % over October and 24.3% -to-year basis.
Condominium and apartment construction activities led the charge, rising 32 percent, to a seasonally adjusted 238,000 units.
Building permits, another closely watched number tracked by housing analysts, increased 5.7 % from October. Building permits forecast future construction activity and weather does not affect building permits numbers, as it does construction start figures. On an annual basis, building permits have risen 20.7%, to 681,000 homes—the most permits approved since March 2010.
The November housing starts figures reveal an increase in three of the four regions measured by the Commerce Department. The Northeast had the most construction activity with a 53.8 percent, followed by the West with 22.6%. The South rose 4.1 percent for November and construction activities in the Midwest dropped 18.2 percent.
Housing Starts Explained
Housing starts represents the number of private housing units under construction for a specific period. Housing units consist of condominiums, townhomes, single-family homes and residential buildings with five or more units.
The calculation tabulates each unit as a single housing start. For example, a 60-unit apartment building counts as 60 housing starts.
Recent History
In October, housing starts were at a seasonally adjusted 628,000 units, according to Commerce Department statistics. Apartment unit construction starts attained a three-year high. So far, in 2011, permits for apartment units have risen 63 percent. Although this metric has decline by 13% in October, since 2009, apartment unit construction has been in an uptrend.
The increase in apartment unit housing starts correlates with the millions of Americans who have lost their homes to foreclosure. This trend does not bode well for the immediate future of the building of new single-family homes and recovery of the U.S. economy.
Annual Housing Starts (2001- 2010)
|
Year
|
Single-Family Homes
|
Multi-family Homes
|
Total
|
|
2010
|
470,900
|
116,700
|
587,600
|
|
2009
|
445,100
|
108,900
|
554,000
|
|
2008
|
622,000
|
283,500
|
905,500
|
|
2007
|
1,046,000
|
309,000
|
1,355,000
|
|
2006
|
1,465,400
|
335,500
|
1,800,900
|
|
2005
|
1,715,800
|
352,500
|
2,068,300
|
|
2004
|
1,610,500
|
345,300
|
1,955,800
|
|
2003
|
1,499,000
|
348,700
|
1,847,700
|
|
2002
|
1,358,600
|
346,400
|
1,704,900
|
|
2001
|
1,273,300
|
329,400
|
1,602,700
|
Source: U.S. Census Bureau
Single-Family Home Starts Decline
Job loss, foreclosures and really take a toll on single-family home development. This segment of the housing market shows no signs of recovery. The figures for 2009 represent the worse year for new Single-family home starts, since record keeping began back in 1963, with 445,100 single-family housing starts.
In November, single-family home increased 2.3 percent. That brings the seasonally adjusted total to 447,000. Single-family homes starts for 2011 will fall short of 2010 numbers.
Typically, single-family home construction makes up 70 percent of the new home market. In a robust economy, new home starts should reach 840,000 on an annual basis.
Conclusion
November’s housing starts and building permit numbers come as good news, and may signal a turn in the housing market. The number of housing starts has exceeded the 627,000 units predicted by a number of economists. According to the experts, 1.2 million housing starts a year indicates a healthy housing market.
Therefore, the number of housing starts fall significantly below historical standards, “but at least it appears to be on an established upward trend," said Paul Diggle an economist for Capital Economics.
Housing starts and build permits function as indicators of economic strength in the U.S. Increased activities create construction job and leads to a domino effect in associated industries, such as plumbing manufacturers and appliance companies.
It is too early to announce a housing recovery, but a string of increases in single-family housing starts would give builders, lenders, consumers and real estate professionals a solid reason to regain optimism about the housing industry.