Ever since the housing bubble burst, home construction was literally put to a halt. It was in 2013 that demand increased and the need for newer homes was felt. Soon enough, construction started picking up the pace and the last month this figure became the greatest number to be recorded in the past five years. According to the industry experts, this is a positive sign for the market, especially when you consider the fact that mortgage rates have also risen.
According to a representative from the Commerce department, home developers started construction projects mainly in the month of November at a yearly rate of almost 1.09 million. This value has been seasonally adjusted. Considering the pace in October, the value has increased by almost 23% and the pace is the fastest since the month of February, 2008.
As of now, both single and multi family homes are being constructed. Single family homes remain just as popular, but now an interest is also shown towards the multi-family buildings that are packed with modern amenities. Last month, the development rate of single family properties reached 21% and the yearly pace was recorded as 727,000. This is once again, the highest figure recorded in the last five years. Since construction has picked up pace, the number of permits issued has also increased. This is strong evidence that in the months to come, builders will develop an increased number of homes.
Though sales have been doing well for quite some time in the market, construction has picked up pace only recently. If development continues at the same rate, it will serve as a positive drive for the economy of the country, especially towards the end of 2014.
As for the mortgage rates, you are already aware that they have increased, but this has shown no effect on construction as yet. The rise in rates was due to the announcement of a reduction in bond purchases, which has not been enforced. Should this happen, the rates might actually rise further and influence the construction pace as well. Though increased mortgage rates may be problematic, home builders are still confident and expect the market to favor them.
New homes only comprise a fraction of the real estate market, but they still have a very prominent effect on the economy. For every home that is constructed, three jobs are created on a yearly basis and almost $90,000 is generated in tax revenues.
Source: www.dailyfinance.com
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