The number of new homes and multifamily units under construction rose nearly 10 percent in January, the third increase in four months, according to new data from the Commerce Department.
And new construction permits rose 7.4 percent, the biggest increase since 2007 and an indication that builders plan to continue increasing production of new housing.
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However, the data, while encouraging, suggest the supply of badly of needed single-family homes will continue to be a problem for potential buyers. January's gains were dominated by multifamily starts, which grew 24 percent last month. Meanwhile, construction of single-family homes rose just 3.7 percent.
“This is a generational issue because we’ve fallen so far behind in supply that we’re still playing catch up,” Robert Frick, corporate economist with Navy Federal Credit Union, told realtor.com. “We’ve still got years to go before we see these numbers improve to normal levels.”
Some economists are nonetheless encouraged. Housing completions were up 7.7 percent over January 2017. Lawrence Yun, chief economist with the National Association of Realtors, called the new data "terrific news."
“This rise in single-family housing construction will help tame home price growth, and the increase in multifamily units should continue to help slow rent growth,' he said.
Tendayi Kapfidze, chief economist at LendingTree, said changes to the tax code passed by Congress could mean more construction of starter homes, which are less profitable for builders, but sorely needed in ther market.
The changes, which cut corporate tax rates and offer other benefits to small business, could encourage construction of more affordable homes, Kapfidze told realtor.com.
“Home builders are able to be a little more aggressive in terms of getting out there and building homes,” he said.
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