A recently released U.S. Commerce Department report shows that housing starts in June rose by 26.6 percent compared to 2014. A 30% increase was also noted in permits offered for the construction of new homes.
This brings both housing starts and permits to their highest levels since before the 2008 financial crisis. Most of the increase was prompted by a large amount of multi-family homes which had their groundbreakings during the month, bringing the total housing starts at a seasonally adjusted annual rate of more than 1.1 million during June. Single-family housing starts instead showed a slight decline when compared to May.
Over 1.3 million building permits were issued during June, which represented the highest amount since July 2007. In comparison, the number of housing permits issued during June 2014 barely rose over the 1 million mark. Permits have also gone up by 7.4 percent on a month-by-month analysis since May; again, most of these were issued towards multiple-family building projects.
Despite the surge of new multi-family housing project, builders still have a lot of confidence regarding the prospects of new single-family houses. The Wells Fargo Housing Market Index indicates that builder confidence into the latter rose to 60 at the start of July, meaning that most builders rate market conditions as good rather than poor. This is the highest level attained in the past 10 years.
Analysts point out the fact that the readings come as predicted when taking into account the increase in sales overall in home markets, as well as the continuous rise in new jobs during 2015. The spike in multi-family housing came because of a continuous decrease in single-family housing sustainability during the recession, with many previous owners needing to become renters.
This makes the single home ownership rate plummet to its lowest in the last two decades, with only 63.7 percent of owner having complete ownership over their homes. First-time home buying is also hitting low points, making up a lesser share of the housing market.
Despite the fact that overall housing rates are reaching pre-recession numbers in some areas, analysts point that single-family housing still needs to rise by about 40 percent, while new housing available for sale currently stand at 4.5 month supply, lower than the recommended 6-month supply, questioning sustainability in the near future and offering slight hints at a possible housing shortage.
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