United States Housing Starts Near Five Year High

United States single family housing starts roared ahead in February to four and one-half year high.  All indications are favorable for a solid recovery in the housing sector, including upward pressures on construction employment and sales of building materials.  In summary:

1. February single family housing starts, at 618,000 units on an annualized basis, are at a 4 1/2 year high;
2. Building permits in February increased 4.6% to 946,000, which is the most since June, 2008, and bodes well for future higher levels of construction activity;
3. February 2013 housing starts represented a 31% growth over February 2012 housing starts;  
4. Existing home prices in January, 2013, were 10% higher than January 2012, due to a strengthening economy;
5.  There is a 13 year low in houses on the market for sale, further putting upward pressure on housing prices; and
6. The outlook for sales over the next six months rose to its highest level in in more than six months.

In the chart below, showing housing starts and recessions.  There are a few additional points that can be made.  Note in the chart below that housing starts dropped during the recession to their lowest level in decades.  The recent recovery in housing starts is fantastic from an economic perspective, but the starting point is so depressed, but housing starts have to grow by another 60% before reaching the long term average of close to 1,000 housing starts per year.  

It is also instructive to observe that precipitous falls in housing starts preceded four of the last five recessions.  We can also observe fairly steep housing start run-ups, representing overbuilding that gets out ahead of sustainable market levels.

Finally, one of the concerns noted by home builders, relative to their ability to meet increased demand, is their concern over having access to sufficient labor, land and materials.  Accordingly, it is likely we will see continued increases in construction employment over the next few years, which will be an important contribution to reducing unemployment.

Sources:

1. United States Census Bureau, U.S. Department of Commerce
2. Associated Press