House Construction Figures Lower than Expected

By Allison Halliday | March 10, 2014

This is supposed to be the year that the housing construction industry finally begins to make a strong comeback, but there are concerns this might not happen. An article in CNN Money.com points out that even though the housing market recovery began a couple of years ago, and property prices finally began to increase, the construction industry didn't pick up at the same time due to the large number of foreclosure properties weighing down the market.

Even so, experts predicted that the recovering jobs market, continued population growth and formation of new households would eventually create a need for new homes. As late as November last year analysts were predicting construction would increase due to a significant shortfall in housing supply compared to demand.

Unfortunately it looks as if this might not be the case, at least not just yet. Recently released data by the Census Bureau shows the seasonally adjusted figures for new homes begun in January was just 880,000. This figure is 16% less than the revised December estimate which was for 1,048,000, and is 2% less than the January last year when the rate reached 898,000. The release of this data follows the release of figures showing mortgage applications declined for two straight weeks. In addition the housing market index for the National Association of Home Builders declined to 46 in February, compared to 56 in January.

Now experts are trying to figure out why the boom in housing construction hasn't yet materialized. The weather is being blamed, as many areas have seen harsher conditions to normal. In spite of this estimates of how much colder weather conditions affect the market have shown it's not as much of an influence as expected. Even though January was cold, it wasn't extreme in comparison with previous years earlier this century, and most of the activity in the real estate market takes place in areas that weren't affected by the weather.

Most of the housing activity in the US is in the South and the West, and when combined these two areas accounted for approximately 76% of national construction starts, and 64% of sales of existing homes in December. The argument is that the cold weather should only have a slight effect on the figures for construction, and that these latest figures are cause for concern for people who were hoping that a construction boom this year would help boost employment figures and continued economic recovery.