Groundbreaking and permits to new build new homes have surged steeply in the US, reaching the highest level in the past eight years, according to the U.S. Commerce Department. This is the strongest recovery in housing starts since 2007-08 financial crisis.
Groundbreakings on new homes surged 26.6%, and permits to build new homes went up 30% year-on-year in June. Economists say an increase in both starts and permits could help ease the demand for housing, in the face of limited supply.
There were 1.174 million housing starts (seasonally adjusted, annual rate) in June, up from June 2014′s rate of 927,000. Permits for June reached an annual rate of 1.343 million (seasonally adjusted, the highest level since July 2007, when housing permits stood at 1.361 million.
“This month’s reading is in line with recent data showing stronger sales in both the new and existing home markets as well as continued job growth… However, builders still face a number of challenges, including shortages of lots and labor.,” the National Association of Home Builders’ chief economist David Crowe said.
Housing starts for multi unit buildings have witnessed a particularly large boost. Starts on buildings with five or more units shot up by 28.6% in June, to an annual rate of 476,000 (seasonally adjusted).
Experts believe that the main reason behind increase in starts is that people who were forced to sell their homes in 2007-08 financial crisis are back in the market, looking to be homeowners again. This has boosted the demand for comparatively cheaper housing. Builders are trying to meet this demand through multifamily housing projects.
The home ownership rate in the USA is currently 63.7%, the lowest in the past 20 years.
This article was republished with permission from Global Property Guide.