2013 was a good year for home builders. While production
remains below normal levels, as determined by population growth and the need to
replace older housing, last year’s gains in home construction generated
real economic benefits.
Multifamily building led the way, growing 25 percent over
2012 levels and reaching a total of 309,000 units. Single-family has lagged but
increased 16 percent in 2013. Total starts reached a level of 931,000 housing
units last year, an increase of 19 percent.
The expansion of building has been an engine of job
creation. According to data from the Bureau of Labor Statistics, the
residential construction sector added 121,000 jobs during 2013 and almost
250,000 over the last two and half years.
With a significant amount of pent-up rental and
owner-occupied housing demand, 2014 is poised to build on these economic gains.
However, monthly housing data for the start of the year have been
disappointing.
The February National Association of Home Builders /
Wells Fargo Housing Market Index, or HMI – a measure of single-family
builder market confidence – experienced its largest monthly drop in index
history, falling 10 points to a level of 46. Any number above 50 indicates that
more builders view market conditions as good rather than poor. Prior to the
February report, the HMI had been above 50 for eight straight months.
The January
Census Bureau report on housing construction reflected this drop in
market confidence, as single family starts declined 16 percent from the
December 2013 pace. January was the second straight monthly decline for total
and single-family starts.
So is it time to call a trend and question the prospects for
housing growth in 2014? No.
First, it is important to note that much of the January
decline in housing construction was weather related. For example, single-family
starts in the
an unusually cold winter, declined a dramatic 60 percent from December to
January. For the
single-family starts pace was 50 percent lower than the January 2013 rate.
While the weather impact is clear in the data, there are
other factors at work that will cause the monthly data to experience stops and
starts along the post-recession growth path to a normal housing construction
market.
Home builders have reported difficulty in filling available
jobs with workers with the right skills. To see this for the construction
sector overall, government job data indicate the number of unfilled
construction sector positions rose from 95,000 in December of 2012 to
143,000 at the end of 2013. The residential building sector is also
experiencing higher building material prices and a shortage of developed lots
in some regions. These supply-side bottlenecks will partially hold back the
uptick in construction as pent-up housing demand is unlocked.
