If the April housing stats are any indicator (and they are), America’s home building industry has rebounded from an abysmal winter season. New home starts came at the fastest pace in seven years, and the ramped-up construction is boosting materials sales at Lowe’s and Home Depot. Experts agree that the numbers indicate an accelerating American economy, which is a welcome change from the economy’s shrinkage in early 2015.
As Josh Boak of the AP writes, “the rate of approved building permits — a harbinger of future construction — rose a solid 10 percent from March to April.” According to government reports, April saw a 20.2 percent spike in residential construction, bringing the seasonally adjusted annual pace to 1.14 million. Single- and multi-family building starts rose substantially in the Northeast, Midwest, and West, and the single-family sector showing increases in the South as well. The Northeast saw the heaviest gains, with an 86 percent jump in the pace of construction over January, February, and March.
In areas that had milder winter weather, the construction of single-family homes has steadily risen since January, besting the numbers from winter 2013.Now that the snowstorms and freezing temperatures which delayed home construction are finally past, the strong pent-up demand for new construction has been driving the housing starts.
The rise clearly reflects an increase in buyer demand and consumer confidence, or as TD Bank Senior Economist Michael Dolega says, “If you’re willing to buy a house, that speaks volumes about your confidence, job prospects and economic fortunes going forward.”
This confidence is showing more strongly in the real estate sector than in any other market. While hiring has solidly increased, overall economic growth has been slow. 223,000 jobs were added in April, which lowered the employment rate to 5.4 percent. Yet the economic growth that should be happening with the increase in employment hasn’t really happened in any sector other than housing. Tight supply has kept new home sales relatively low for the market conditions. The national inventory of homes sits at about 4.6 months’ worth, considerably lower than the 6 month inventory that economists say indicates a healthy market. April’s strong housing starts have eased concerns about the national housing supply.
Home supply stores have cashed in on the real estate boom Households worth over $200,000 have seen an increase in property values, which encouraged them to buy more big-ticket items like grills, riding lawnmowers, water heaters, and solar panels. Home Depot CFO Carol Tome cited company earnings
of $1.58 billion, or $1.21 per share, for the past three months. This is a marked improvement over last year’s earnings of $1.38 billion at $1 dollar per share.