Home Builders Are Optimistic About Sales Growth

September 22, 2016

 Back Elevation of New Naples Waterfront Home Built by Big Island Builders



WASHINGTON - Homebuilders pulled back on construction in the South, causing the pace of August housing starts nationwide to fall to their lowest level in three months. Despite the monthly decline, construction activity has accelerated for much this year. Builders are increasingly optimistic about sales growth, a reflection of how steady job gains are leading more Americans to purchase new houses and sign leases for new apartments.

Jennifer Lee, a senior economist at BMO Capital Markets, blamed the decrease in construction in the South on August rainstorms


“Look for a rebound in the next month or two,” Lee said.


Residential construction has picked up this year as steady job gains and low mortgage rates propel more Americans to seek out homes. Starts have increased 6.1% so far in 2016, with single-family houses leading the way. Construction activity could be even stronger based on demand, but rising land and labor costs have held it in check.

In the short term, builders have relatively few properties in the pipeline. Authorized permits fell 0.4% in August to an annual rate of 1.14 million — a level slightly lower than pace of new construction.

Yet job growth has pushed the unemployment rate down to just 4.9%. Hiring usually corresponds with increased permits for single-family houses.

The pace of job growth has exceeded new construction in recent years. An analysis released Monday by the National Association of Realtors found that home construction lags the rate of job growth in 80% of metro areas, including New York City, Dallas, San Francisco, Miami and Chicago.

Low mortgage rates have added to the momentum. The average 30-year fixed-rate mortgage was 3.50% last week, according to mortgage buyer Freddie Mac. That average is near record lows and significantly below the historic average of 6 percent.


In that environment, confidence among homebuilders climbed the highest level in nearly a year, reflecting a brighter outlook for sales now and into 2017. The National Association of Home Builders/Wells Fargo builder sentiment index released Monday climbed six points this month to 65 following a downwardly revised reading of 59 in August.


Big Island Builders is a luxury custom homebuilder in Naples, Florida, building in Naples' most exclusive neighborhoods and communities. For more information please call 239.262.6867 or visit www.bigislandbuilders.com.





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