According to the U.S. Census Bureau, new home starts and permits for construction increased in October, marking an end to previously mild upsurges and an indicator that buying activity could be warming up. Housing starts jumped 25.5 percent in October—the highest pace since August 2007—to a seasonally adjusted annual rate of 1.323 million, the Commerce Department reported today.
The rise in multifamily housing starts is perhaps the most remarkable; starts in properties with five or more units recorded a 74.5 percent increase to 445,000 in October. Single-family home starts grew to 869,000, the highest rate in nine years.
Permit issuances did not keep the pace of housing starts however, potentially indicating housing start momentum is temporary. Permits for privately owned homes increased 0.3 percent in October to a seasonally adjusted rate of 1.229 million, and permits for single-family homes rose 2.7 percent to a pace of 762,000.
Nationwide Chief Economist David Berson points out millennials as important sources of housing start activity, “Housing starts are being driven higher by improved household growth as the economy promotes further job and income gains. With improved employment and income prospects, millennials are an expanding portion of housing demand as they move out of their parents’ homes – increasingly to form families.”
Future buying activity has been obscured by the conflicting effects of steadily rising home prices and low mortgage rates. Are low rates enticing more buyers than high prices deter? Economists are wary to project steady construction increases, with the small increase in permits and possibility of rising rates. Can millennials—with their population numbers, rising incomes, and decisions to begin families—provide enough demand to support continued housing starts, or will high prices and low inventory snub would-be buyers’ transition into homeownership?