Behind the Numbers: Home Builders ‘Shaking off the Shackles’

Associated Press
Home construction was up last month, driven by a gain in the multifamily sector.

By Dawn Wotapka and Alan Zibel

The apartment sector continues to fuel residential construction.

Home construction last month increased 1.5% to a seasonally adjusted annual rate of 699,000 from December, the U.S. Department of Commerce said Thursday. The results, which beat expectations, were driven by an 8.5% gain in multifamily homes with at least two units. Single-family construction, the bulk of the market, fell by 1%.

The data also showed newly issued building permits, a gauge of future construction, inched up 0.7% in January from a month earlier. Those results were slightly lower than expected, but any gain is good news these days for the ailing housing industry.

To be sure, the results show that home builders continue holding back on construction as the sector limps through the worst housing downturn in generations. Builders have started construction on about 1.5 million new homes per year, on average, since records started being kept in 1959. Last year, the industry started construction on only 609,000 homes.

The single-family market’s pain is the apartment market’s gain. As fewer people buy homes, more people are renting them, creating tight supply in many markets nationwide. Developers are rushing to start construction to meet the increased demand.

Here’s what industry watchers think about today’s data:

Patrick Newport and Erik Johnson, economists, IHS Global Insight: “We believe that most (but not all) of the improvement is weather related. January was the fourth-warmest January on record and the 29th driest (data start in 1895). The weather in December and November was also milder than normal. Weather can shift activity across time, but it cannot jump start the housing market. One should therefore expect a payback in housing starts in March and April (but maybe not in February, since January’s good weather has carried over into this month).”

Paul Dales, economist, Capital Economics: “January’s housing starts data support our view that home builders are shaking off the shackles of the last five years and are beginning to contribute to GDP growth. That said, the housing sector is currently not big enough to set the economy alight.”

Stephen East, builder analyst, ISI Homebuilding Research: “January starts & permits look to be a pleasant surprise. … If the results of the year’s first month are an indicator for 2012, the first leg of the recovery for new housing will be firmly in place. Again, that will also be a more sustained positive for the builder equities, supporting the valuations witnessed of late.”

David Toti, REIT analyst, Cantor: “In recent years, the multifamily REIT recovery has been partially driven by low housing supply. While supply acceleration remains a risk, activity remains well below the 10-year historical average, to date. We continue to closely monitor supply numbers and believe that a supply threat is likely a 2013-‘14 phenomenon.”

John Tashjian, principal, Centurion Real Estate Partners: “The report is the first sign of spring for the housing market. The market really needs to clear foreclosure overhang and more attainable financing needs to come back before we can talk about a housing recovery.”

Follow Dawn @dwotapka

Fatal error: Uncaught Exception: 12: REST API is deprecated for versions v2.1 and higher (12) thrown in /home4/jdvc/public_html/wp-content/plugins/seo-facebook-comments/facebook/base_facebook.php on line 1273