New-Home Building On the Rise

The news coming out of the home construction industry is cautiously positive. We do not think that we have overcome all the problems and obstacles, but all indications are that new home construction rates are on the rise. The report below shows positive signs and we can only hope this trend will continue. - RT

New home construction is picking up just in time for the spring buying season, according to the latest new-home report released on Tuesday from the Commerce Department. Builders broke ground on more new homes in March than in the last six months.

Another bright spot: Building permits, an indicator of future construction, increased 11.2 percent for the month.

After a dismal winter performance, new-home building bounced back 7.2 percent in March from February to a seasonally adjusted 549,000 units. Yet, the sector is still far below the 1.2 million units a year that economists consider a healthy building pace.

The new-home sector has faced hard times in recent years, competing against a flood of foreclosures and short sales on the market that have pushed housing prices down. In February, construction fell to its lowest level in nearly two years, and requests for building permits to start new projects had dropped to a five-decade low in February.

Builder sentiment also remains low, according to Monday’s release of the National Association of Home Builders’ monthly index of industry sentiment for April.

Builders' views on the market had risen slightly in March to 17 in the index but in April fell back to 16, a level that it had remained at for four straight months prior to March. Any reading below 50 indicates negative sentiment about the market, a level the index hasn’t been above since April 2006.

Source: “U.S. Housing Starts, Permits Rebounded in March,” Associated Press (April 19, 2011) and “Builder Outlook for Home Buying Falls Slightly as Foreclosures, Short Sales Weigh Heavy,” Associated Press (April 18, 2011