Increased housing starts signal still recovering housing market

August 28th, 2015

Single-family construction starts were up in July.

Privately owned housing starts increased in July. The increase in construction of single-family homes is contributing to an upward swing in the housing market.

According to the U.S. Department of Commerce, these starts jumped 10.1 percent in July compared to the same month last year and 0.2 percent since June. Additionally, the seasonally adjusted rate of all housing starts is now 1.21 million, which is the highest since October 2007, The Wall Street Journal reported.

The demand for single-family homes is high due to the lack of available houses on the market, encouraging construction and boosting homebuilder sentiment. In fact, builder optimism is the highest it's been since November 2005, according to the National Association of Home Builders. 

"Continued job and economic growth will keep single-family housing moving forward," David Crowe, NAHB chief economist, said.

On the other hand, privately owned and single-family housing permits both decreased, leading some industry professionals to believe that the climate is more favorable for renters and those in the market for smaller properties, like condominiums. What's causing these slacking numbers? 

"In essence, areas with slower home price appreciation and fewer new jobs are still the construction laggers, but so are the markets with some residual distressed inventory left over from  the housing bust," Selma Hepp, chief economist for Trulia, told HousingWire

Fewer people are likely to move into an area if there isn't a good job market there. These lagging areas are holding back the total number of permits.

In light of the declining permit activity, the increase in home construction starts signals that the housing market is still in a period of recovery. As the job climate continues to improve, more consumers may purchase homes. In addition, low mortgage rates could drive an increase in housing starts.