During January, residential construction increased 14.6%, according to housing statistics [.pdf] released today from the Census Bureau and Housing Department. This is the greatest monthly rise in residential construction since May 2009 or in twenty months. Though, this monthly surge in residential construction was not due to the construction of new homes, but was instead due to the construction of new apartment buildings.
In fact, apartment construction soared 80% in January, while home construction actually declined 1%. Further, apartment construction in January was 82% higher than January 2010, whereas home construction in January was 19% lower than January 2010. Clearly, developers expect an increased demand in apartments and a decreased demand in homes. This expectation likely involves the combination of an aging population and the weak economy.
Overall, there were only 50,000 housing starts during January, which is 2.6% below January 2010. The fact that residential construction could sharply rise 14.6% and still lag behind the previous year shows how the latter half of 2010 was a particularly bleak time for the housing market. Regardless of the relatively weak housing market, the monthly rise in home construction means more people were put back to work in January and is at least a good sign.
The amount of building permits issued during January, however, was not so good. Building permits declined 10.4% in January. The amount of building permits issued during a month generally indicates residential construction for the next month. For instance, building permits increased 16.7% in December 2010, which followed with a sharp rise in construction during January. With the decline in permits during January, residential construction will likely decline in February.
In order for the housing market to fully recover, several factors must consistently improve, including: foreclosure filings, home sales, home prices, credit lending, and of course unemployment. Among these key factors, though, positive signs have recently been inconsistent.
The National Home Builders Association confirms an inconsistent housing market with the results of its monthly survey released yesterday. The NHBA has been conducting a monthly survey for the past twenty years of home builders to determine whether builders view the housing market as good or poor for the next six months. A rate above fifty signals good conditions, while anything below fifty signals poor conditions. The survey released yesterday showed a poor rate of sixteen, which is the fourth consecutive month with this rate. This clearly shows unstable expectations for the housing market.
A resurgence in the housing market requires much more than a monthly surge in apartment construction. The unemployment rate has been 9% or higher for 21 consecutive months. As long as the unemployment rate is elevated, prospective home buyers, as well as other housing statistics, will remain inconsistent.