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New Home Construction Shows Signs of Recovery

Home construction is making a long-awaited recovery that could help energize the U.S. economy.

The improvement has been gradual. But builders are responding to interest from buyers drawn by reduced prices, record-low mortgage rates and rising rents, which have made home purchases comparatively appealing. And the supply of new homes has shrunk to near record lows. That's pushing developers to build more.

"We've been hoping for this for a long time," said Celia Chen, a housing economist at Moody's Analytics. "Housing has been flat-lining at the bottom for two years. It looks like things are turning."

Last month, U.S. builders broke ground on the most homes in nearly four years. Single-family home building — the bulk of the market — rose for a fourth straight month. And permits to build single-family homes reached their highest point since March 2010. Permits are 76 percent higher in Miami than a year ago, Moody's estimates. Nationwide, they've risen 27 percent.

 

 

A continued resurgence would deliver big economic benefits: A healthy pace of 1.5 million new homes a year would lower the unemployment rate by about 1.5 percentage points and create 50,000 additional jobs a month, according to calculations by Joel Prakken, chairman of Macroeconomic Advisers. About half the jobs would be construction workers and contractors.

It would also add roughly 0.5 percentage point to annual economic growth, Prakken estimates.

New homes represent just 20 percent of the home market. But each home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to data from the home builders association.

Across the country, despite increased building, few new homes are available. There were only 145,000 new homes available in May — just above April's 144,000, which was the lowest on records dating to 1963.

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