Last month the number of building permits hit their highest level for six years, raising hopes of the housing market becoming more stable. According to data from the Commerce Department, ground breaking rose by 13.2%, reaching a seasonally adjusted rate of 1.07 units.
This is the highest level seen since November 2013, and increases were reported in all four regions of the country. Figures for March were also revised, showing just a 2% gain compared to the previously reported figure of 2.8%. According to the article in aol.com, economists had forecast housing starts increasing to a 980,000 unit rate for April. When the figures are compared to April last year, groundbreaking has increased by 26.4%.
Previously the housing market had stalled due to a combination of different factors which included increasing property prices and mortgage rates, lack of wages growth and a cold winter. During the first three months of this year the residential sector contracted for the second consecutive quarter. Residential construction is continuing to be driven by the multifamily sector, and it's been predicted that construction is unlikely to contribute towards economic growth this year. If this is true it will be the first time since 2010. These facts have gone unnoticed by the US Federal Reserve amid concerns it could undermine the economy.
In April, groundbreaking for single-family homes, which form the largest part of the market, increased by 0.8% to 649,000 units. Groundbreaking for multifamily homes rose by 39.6% in April, reaching 423,000 units. Groundbreaking for properties with five or more units reached its highest level since January 2006.
Permits to build houses increased by 8%, reaching 1.08 million units in April, which is the highest figure since June 2008. It had been predicted that this figure would be just 1.01 million units. When compared to April last year the number of permits issued was up by 3.8%.
Permits to build single-family homes rose by 0.3% to 602,000 units. The number of permits issued for single-family homes is continuing to lag behind, suggesting this sector could decline in the coming months. A recent survey shows confidence amongst single-family house builders dropped to a one year low this month. The number of permits for multifamily homes rose by 19.5% to 478,000 units in April.
The number of permits issued is well ahead of the number of starts which could show some projects are delayed. Permits for properties with five or more units were up by 21.8%, reaching their highest level since June 2008. This particular sector is largely driven by the demand for rental units, but builders are faced with increased material costs and shortages of skilled labor.