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Home Sweet Housing Starts in 2014

Friday, January 23, 2015

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U.S. builders broke ground on more than one million new homes and apartments in 2014—the highest level recorded since the boom of 2005 and 8.8 percent higher than the 2013 total, the federal government reported this week.

A strong year ended on a strong note, as December saw starts on single-family homes reach their highest level since March 2008, the Commerce Department reported. Increased building permits added confidence that the trend would be sustained.

Overall, an estimated 1,005,800 housing units were started in 2014—8.8 percent above the 2013 figure of 924,900.

Ryan / BY CC BY-SA 3.0

Overall, about 1,005,800 housing units were started in 2014—8.8 percent above the 2013 figure.

The unexpected surge spurred optimism across the industry about the stability of the economic recovery.

'The Right Direction for the Economy'

Single-family housing starts, the biggest part of the market, jumped by 7.2 percent to a seasonally adjusted annual pace of 728,000 units, the government said. The smaller, and more volatile, multifamily market dipped slightly, but the overall growth rate increased 4.4 percent over November.

The annual rate beat the Wall Street forecast, and home builder stocks rose on the report, Reuters reported.

“The strength is where you’d like to see it, in single-family housing,” Brian Jones, a senior U.S. economist at Societe Generale in New York, told Bloomberg.

“It bodes well for residential real estate. It’s another thing going in the right direction for the economy.”

Jennifer Lee, senior economist at BMO Capital Markets, echoed that view in an interview with the Associated Press.

Referencing lower unemployment and relaxed requirements by some banks, Lee said, "The housing system has some good support systems in place."

Permits, Starts and Completions

U.S. building permits were issued for 1,032,900 housing units in 2014, 4.2 percent above the 2013 total of 990,800.


The National Association of Home Builders remained bullish on multifamily construction in 2015.

Permits were down slightly overall for the month, but single-family permits up 4.5 percent above the November rate. Multifamily permits (five or more units) totaled 338,000 in December.

Single-family housing starts in December were 728,000, 7.2 percent above the November total. Multifamily starts totaled 339,000 in December.

Completion of privately owned homes was at a seasonally adjusted annual rate of 927,000, 6.3 percent above the revised November estimate of 872,000 and 19.6 percent above the December 2013 rate of 775,000.

Single-family housing completions in December were at a rate of 667,000, 9.5 percent above the revised November rate. An estimated 883,000 housing units were completed in 2014, 15.5 percent above the 2013 figure of 764,400.

Housing starts hit a record low of 554,000 in 2009 and a three-decade high of 2.07 million in 2005.

The View by Region

Combined single-family and multifamily production was up in three out of four regions in December. The Northeast posted a 12.5 percent gain; the South, 8.8 percent; and the West, 5.8 percent. The Midwest posted a 13.3 percent decline.

Overall permit issuance was down 1.9 percent in December to a rate of 1.032 million. Single-family permits rose by 4.5 percent to 667,000 units while multifamily permits fell 12 percent to a rate of 365,000 units.


Home building in the South rose 8.8 percent in December. The Northeast and West also gained.

Regionally, permits were mixed in December. The Midwest and South posted gains of 6.7 percent and 9.6 percent, respectively, while the Northeast and West dropped 16.8 percent and 20.5 percent.

'Increasingly Optimistic'

The National Association of Home Builders greeted the news with enthusiasm, with chief economist David Crowe predicting that the momentum would "carry forward in 2015."

“A growing labor market and strengthening economy will spur steady growth in single-family housing production in the year ahead,” Crowe said.

NAHB chairman Kevin Kelly, a home builder from Delaware, said the government's figures "continue to be in line with our recent surveys, as builders have been becoming increasingly optimistic."

The group was especially upbeat about the multifamily market. Crowe said NAHB's Multifamily Production Index, a measure of members' atttitudes toward the market, is "telling us that the market is very strong and is expected to stay that way for the foreseeable future."

Improving wages should help more young adults to move out on their own and start new households—a critical factor in sustaining longterm growth.

Household formation is currently about 500,000 a year, "far below the more than 1 million mark that would signal a robust housing market," the AP reports.


Tagged categories: Economy; Good Technical Practice; Housing; Housing starts; Market trends; Multifamily; National Association of Home Builders (NAHB); North America; Residential Construction

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