Housing Starts, Builder Confidence on the Upswing

With new construction on the rise and the current affordability of homes for the median income earner, consumer confidence is returning to the real estate market.

National Housing starts rose 1.5 percent in January to a seasonally adjusted annual rate of 699,000 from the revised December estimate of 689,000, and they were 9.9 percent above the January 2011 rate of 636,000, according to the latest figures released by the U.S. Commerce Department. Housing starts for single-family homes fell 1 percent in January to 508,000, down from 513,000 in December.

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Permits for new construction edged 0.7 percent higher to 676,000 in January from the revised December rate of 671,000, and they were 19 percent higher than the January 2011 estimate of 568,000.

The upward trend in new construction has bolstered builder confidence for the fifth consecutive month. In February, the National Association of Home Builders/Wells Fargo Housing Market Index rose four points to its highest level in four years. Each of the three components of the index also improved for the fifth consecutive month in February. The component measuring traffic of prospective buyers rose one point, while the components measuring sales expectations for the next six months and current sales each rose five points.

In a related matter, housing affordability rose to a record level in the fourth quarter of 2011, according to the NAHB/Wells Fargo Housing Opportunity Index. Three-fourths (75.9 percent) of all homes sold in the fourth quarter were affordable to households earning the national median income of $64,200, the highest percentage recorded in the 20-year history of the index. The most affordable major market was Youngstown-Warren-Boardman, Ohio – Pa., where 95.1 percent of all homes sold during the quarter were affordable to households earning the area’s median income of $54,900.

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