Today’s housing numbers for October were cause to cheer, even if on the surface they appear to be a mixed bag. Housing starts were up 3.6% and single-family permits rose 2.2% to a 562,000 rate, the highest since July 2008. And although multi-family building permits fell 10.6% to a 304,000 rate, that’s still the second highest since Aug. 2008. Here’s an interesting analysis on the housing situation by Patrick Newport, U.S. economist, IHS Global Insight:
"So, more than three-quarters of the way through this year, what can one say about the new construction market? First, the multi-family segment is faring better than the single-family segment. Its share of housing starts has risen from about 10% in late 2009 to 34% today. The multi-family segment is making steady progress in most states — particularly states in the South and West, and in some states, such as Texas, it is back to prerecession levels and climbing.
“Second, the single-family market is starting to pick up speed in three of the four regions. For some reason — it might be related to a slowdown in population growth in this region in recent years — single-family new construction remains stuck near the bottom in the Northeast.
“So, why is housing coming back to life just as the rest of the economy has slowed? Housing has a self-correcting mechanism -- population growth. Every year, the U.S. population increases by about 3 million, and the number of households increases by 1.1 million to 1.3 million. New homes have to be built to meet this new demand. In recent years, housing construction has been depressed, first because of overbuilding during the boom years, then, because the Great Recession forced many Americans to move in with friends and family. Inventories of lived-in homes, as a result, have sunk to seven-year lows and new home inventory of completed homes is at a record low. This has pushed home prices of new and existing homes up. Builder profit margins have risen — and they are responding by building more homes. We expect these trends to continue in 2013 and 2014."