Builders Confident as New Home Permits Reach High Point

Following a brief surge at the beginning of the month, new housing starts fell in February by 1.1% according to the latest report from the Commerce Department released on Tuesday. But despite this setback, there are signs of optimism that a recovery is still on the cards, with the number of new home permits issued increasing by 5.1% - the best we have seen in over three years.

Permits for new single-family homes did very well indeed, increasing by some 4.9%, the highest level since April of 2010. Meanwhile, new permits granted for multi-family homes rose by 5.6%, according to Reuters.

This increasing optimism over the future gauge of building is being warmly welcomed by the US building industry, which suffered one of its worst years on record in 2011. To get a perspective on just how bad last year was for America’s builders, construction last February was up by an incredible 34.7% on February 2011.

The slight drop in housing starts this February can be put down to a reduction in single-family home construction, say Reuters. Single-family homes are the biggest sector of the US construction industry, and they dropped by a disappointing 9.9% last month. However, multi-family homes continue to be a bright spot for the industry, with new construction soaring by 21.1% as demand for rental apartments continues to grow.

Another good sign is builder confidence, which has picked itself up over the last few months and is now holding itself steady. According to Reuters, the National Association of Home Builders/Wells Fargo index reached a five-year high by the beginning of March.

Barry Rutenberg, chairman of the NAHB, said that most people in the construction industry were optimistic for the future:

"While builders are still very cautious at this time, there is a sense that many local housing markets have started to move in the right direction and that prospects for future sales are improving."

Even so, there remain a number of hurdles to cross before builders can confidently say they are on the road to recovery – most especially the tight restrictions on credit being faced by builders, and the expected rise in new foreclosures to contend with this year.