Residential real estate is continuing to recover as indicated by recent reports by the Commerce Department. New home construction has increased by 15.7%, putting construction at 10.9 annualized rate. This figure is much higher than the previously estimated 965,000 starts by Bloomberg economists.
This recovery is likely due to the strengthening of the job market as well as lower borrowing rates. While these indicators suggest a real estate turn around, the stagnation of wage growth and the ever-tight lending restrictions continue to keep many out of the real estate market. Many still can’t afford to buy homes.
This news is accompanied by reports of the consumer-price rate being the lowest in months as of July. In other words, the cost of living is currently low, especially as gas prices decline moving into the Fall.
Larry Nicholson, President and CEO of the Ryland Group, Inc., a homebuilding group based in California, confirms expectations for the outlook of the housing industry.
We remain confident about the future of housing… We see the markets continue to move forward. We have good traffic. We’re making sales. We’re making margin. We’re pretty upbeat for what we see for the rest of the year.”
With the labor market picking up speed, the costs of living being low, and the low borrowing rates, it is expected that the housing market will continue to improve in the upcoming months. The benefits will likely be felt by first-time home buyers (as opposed to move-up buyers) thanks to highest start rate this year of single-family homes in July, and the 28.9% increase in multi-family homes (apartments and condominiums).
Read more here- “Housing Starts in U.S. Rise to Highest Level in Eight Months,” (Lorraine Woellert, Bloomberg)