New-Home Market Shows Steady Improvement


After a surge last month, housing starts dropped in February by 1.1 percent, the Commerce Department reported Tuesday. However, the slip was offset by a hopeful sign for builders that a recovery is still on track: Permits for future construction soared 5.1 percent, reaching its highest level in more than three years.

Permits for single-family homes increased 4.9 percent alone, the highest since April 2010, while permits for multi-family homes rose 5.6 percent, the Commerce Department reported.

The future gauge of building is a welcome sign for the building industry, which last year suffered one of its worst years on record for construction.

In comparing residential construction from this February to February 2011, construction is up 34.7 percent.

February’s modest decrease in housing starts was mostly due to a drop in single-family home construction, which makes up the biggest bulk of new construction. Single-family home construction dropped 9.9 percent in February. Meanwhile, multi-family housing continues to be a bright spot in the sector, soaring 21.1 percent in February due to an increase in demand for rental apartments.

Builder confidence has picked up in recent months and held steady, holding at near a five-year high in March, according to an index by the National Association of Home Builders/Wells Fargo.

“While builders are still very cautious at this time, there is a sense that many local housing markets have started to move in the right direction and that prospects for future sales are improving,” says Barry Rutenberg, chairman of the National Association of Home Builders. However, builders still cite hurdles that persist in the recovery, particularly the tightening of credit for builders and buyers and the inventory of distressed properties pulling down overall home prices.

Source: “U.S. Housing Starts Dip; Permits Near 3-1/2 Year High,” Reuters News (March 20, 2012) and the National Association of Home Builders