US housing builds rose by 18.6 per cent in January as the new year started, and builders ramped up construction of single-family houses to the fastest pace in eight months.
According to the US Commerce Department ground breaking on new builds occurred at a seasonally adjusted annual rate of 1.23 million, way up from December, when the annual rate was just 1.04 million.
The low 3.8 per cent unemployment rate in America has provided a stable economy that has increased interest from would-be US buyers as well as overseas property investors, but affordability challenges from high prices and tight inventories have restricted sales.
Mike Fratantoni, chief economist for the Mortgage Bankers Association, said: ‘Given the underlying strength in overall housing demand, slow and steady growth in new supply will support a modest increase in sales.’
Most of the new construction builds came from single-family houses, which were being built at the strongest rate since May 2018. Still, overall housing starts in January were slightly below the 2018 total of 1.24 million as the pace of apartment construction slowed.
Permits for builds, an indicator of future activity, improved 1.4 per cent to a seasonally adjusted rate of 1.35 million. The permits suggest additional apartment builds in the coming months, as that segment accounted for the gains.
The housing market in the US was hurt for much of 2018 by rising mortgage rates, which made it costlier to purchase a home. But average rates have declined since early November and the average 30-year rate was 4.41 percent this week, providing a possible boost for home buying this year.
Matthew Speakman, an economic analyst for the real estate company Zillow, felt that housing might still look sluggish over the next few months, but the construction gains suggest that the outlook will eventually brighten.
He said: ‘It was a difficult end to 2018, but builders appear primed for better days ahead.’