Friday, January 18, 2013
If you heard that housing starts increased 12% from November to December 2012, you would probably think that it sounds like good news. If you learned that housing starts increased almost 37% from a year ago, you may stop to think, just how significant are those numbers?
The national 2012 year over increase shows that newly constructed homes totaled 954,000; a hefty increase from the previous year, which only recorded 697,000. Not only are new houses being built for current and future home buyers, but they are also being completed at a much higher rate. About 80,000 more homes were completed in the last year compared to 2011. A contributor to these upticks includes the authorization of building permits, which are also up close to 200,000 units from the previous year. So what..?
Clearly the housing starts are indicative of real estate market that is showing impressive signs of growth. These home starts show that builder confidence is at a peak and they are springing into action. Positive outcomes are being produced. This also is related to falling home inventory levels in the real estate market. In the last year, the real estate market has seen a 27% decline in the amount of homes for sale. Simple supply and demand would tell you that prices will continue to go up as inventory declines, which is further fueled by the availability of credit and the growing demand for home ownership.
Even Deutsche Bank analysts have taken note of the housing market index, citing,” if the pace of housing starts increases over the next year by the amount that home builder sentiment implies, then the contribution from residential construction in the GDP accounts should double as well…”. With the index gaining 22 points over the last eight consecutive months ( something we haven’t seen since the mid- 1980’s), it has positioned the housing market to be a helping hand in not only the real estate market, but in the economy as whole.
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