Construction on new homes went up in April as building permits reached the highest level since November 2013. This is a good sign for the somewhat troubled spring housing market.
Home building increased 13.2 percent to 1.07 million from March's 947,000 pace, the Census Bureau revealed Friday. Construction picked up especially on the multi-family homes that spiked 40 percent from March. Work on single-family homes was up 0.8 percent in the same period. The figures exceeded analyst forecasts.
Building permits also went up 3.8 percent on a year-over-year basis. Permits for multi-family homes were up 19.5 percent to 478,000 in April from 400,000 in March. Permits for single-family homes, however, hardly rose to 0.3 percent to 602,000 from 600,000 in the same period.
"The current stock of apartments is insufficient to satisfy demand, sending rents soaring across the country and making multi-family units an attractive investment for developers and landlords," Stephanie Karol, an economist at IHS Global Insight told Reuters.
Demand and supply have been largely disproportionate. Construction on single-family homes has been held back due to declining affordability and increasing prices. The current trend is focused on the rental market as more people look towards leasing.
This also explains why construction on multi-family homes has been rising.
"What's been notable since the housing crash is how much construction is aimed at meeting demand for rental housing. There's been a trend away from homeownership that's persisted even as the pace of foreclosures has slowed. What we can see is that higher home prices, particularly for new homes, have weighed on demand," said Ryan Wang, an economist at HSBC Securities, to Bloomberg.
In a recent report, the National Association of Realtors revealed that home prices increased in 89 percent of the metropolitan areas of the country on a year-over-year basis.
"The general trend is that markets that are seeing consistent strong price rise - South Bend tends to be a little volatile - there you have a solid local job-creating environment combined with a shortage of inventory that is really beginning to push up prices," said Lawrence Yun, chief economist at NAR, in the report.
However, experts forecast that the housing market will pick up steam in the coming months.
"We expect the housing market to show further signs of stabilization in the coming months," said Teunis Brosens, Senior Economist at ING Bank, to RTT News.
"The housing market may not be the buoyant growth engine that it was last year, but we do not expect it to provide credible reason for the Fed to delay tapering or postpone interest rate hikes either," he added.
