Rise in U.S. building permits signals growing confidence
03/21/2012 7:39 AM
03/21/2012 7:39 AM
U.S. builders began laying the groundwork for a turnaround in the housing market later this year by requesting the most building permits in any month since October 2008.
Building permits for single-family homes and apartments jumped 5.1 percent in February, according to a government report Tuesday.
That offered some hope that buyers may be ready to come back four years after the housing bubble burst.
Builders have slowly grown more confident over the past six months after seeing more people express interest in buying a home. And home sales are slowly rising.
Economists cautioned that construction levels remain depressed and the housing market has a long way to go before it is back to full health.
But Ian Shepherdson, chief U.S. economist at High Frequency Economics, said he expects further gains over the next few months.
“Housing will add to growth all year, and beyond,” Shepherdson said. Builders broke ground on slightly fewer homes in February.
Housing starts dipped to a seasonally adjusted annual rate of 698,000 homes last month, the Commerce Department reported.
That’s down from January’s revised level of 706,000, which was the highest since October 2008.
Building permits, a gauge of future construction, rose to 717,000.
Two-thirds were for single-family homes, which are critical to a housing recovery.
It can take up to 12 months for a builder to obtain a permit and construct a single-family home.
“The key numbers in this report are the housing permits – not the starts,” said Patrick Newport, an economist with IHS Global Insight. “The permits are better measured than starts, are less influenced by weather and are forward looking.”
Both figures are still roughly half the level most economists consider healthy.
Newport said 2012 should be a better year for construction of new homes.
He projects 745,000 homes will be started, up from 611,000 last year. Two-thirds are likely to be apartments and condos, reflecting pent-up demand for housing among young adults who are living with their parents.
“This report is one of the more encouraging new construction reports we have seen in the last four years,” Newport said.
A mild winter allowed builders to keep working in most parts of the country.
And an improving job market has many slightly more optimistic about home sales this year.
Builders are starting to see some signs of progress. They are more confident after seeing more people express interest in buying a home.
Mortgage rates are hovering near record lows below 4 percent. And home sales started to rise at the end of last year.
Though new homes represent just 20 percent of the overall home market, they have an outsize impact on the economy.
Each home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.
There are some hurdles to a smooth recovery: Builders are struggling to compete with deeply discounted foreclosures and short sales – when lenders allow homes to be sold for less than what’s owed on the mortgage.
After previous recessions, housing accounted for at least 15 percent of U.S. economic growth.
Since the recession officially ended in June 2009, it has contributed just 4 percent.