Contractors Are Busy Building Single-Family Homes
Next week will see the release of October’s new home sales figures by the Commerce Department. In a recent announcement, the department highlighted a 13% increase in the construction of single-family homes compared to the previous year. This surge in construction is playing a crucial role in bolstering both the housing market and the broader economy.
According to MarketPlace, this time a year ago, housing construction was depressed.
“Mortgage rates were rising very quickly, homebuilders were very worried about the future and they pulled back very heavily on housing starts,” said Mark Fleming, chief economist at First American.
This year, he noted, mortgage rates are still up there, but homebuilders realize they have an advantage: Demand is high, but there aren’t enough existing homes on the market.
“All of that is good news for new homebuilding,” Fleming said. “‘If you build it, they will buy it,’ is generally the premise here.”
And when homebuilding picked up, the broader economy noticed.
“Residential construction was actually a drag on economic growth for the better part of the past two years, but because homebuilders started to ramp up activity, that has added to economic growth,” said Charlie Dougherty, an economist at Wells Fargo.
Building a new house generates business throughout the housing supply chain. “When you build a new home, that involves construction workers, that involves the purchasing of various materials like lumber,” Dougherty added. “And all of that represents construction activity, which is a part of overall economic activity.”
The backdrop to all of this is the Federal Reserve trying to slow down the economy to combat inflation.
