Home building rises to key milestone
NEW YORK (CNNMoney) — The annual pace of housing starts topped 1 million for the first time in nearly five years in March, another sign of the rebound in the sector.
The pace of housing starts came in at an annual rate of 1.04 million in the month, up 7% from February and 47% from a year earlier. It marked the first time since June 2008 that the pace of building crossed the 1 million benchmark.
Even with the recent gains in the sector, the reading was much stronger than forecasts.
But much of the spike in housing starts was due to a surge in building apartment buildings and condos complexes with five or more homes in them. Those units jumped by 27% from February and 82% compared to a year ago. The number of traditional single-family homes started actually fell by 6% from February. The multi-family numbers can be very volatile as each unit in a complex is counted.
After years of depressed activity, home building and real estate have turned around in recent months, helped by a combination of near record low mortgage rates, lower unemployment and a drop in foreclosures that has lifted home prices.
As a result, sales of both previously owned homes and new homes are both up. The rebound in building, sales and home values has helped to lift overall economic growth
But there have been some concerns about growing problems in the sector, as rising prices for raw materials and some shortages of construction workers have put a crimp in some builders' results.
Even as they rushed to start homes, builders filed for fewer building permits in March, with the annual rate slowing 4% to 902,000.
"The trajectory for the single-family market continues upward, but builders appear to be struggling with credit issues for lot development and rising construction costs," said Mark Vitner, senior economist at Wells Fargo Securties. He said the pull-back in permits could lead to lower housing starts in April.
The National Association of Home Builders also reported a decline in member confidence for the third straight month when it released its April survey Monday.
Stocks in the sector have been mixed so far this year. While shares of some builders, such as KB Home and D.R. Horton have outpaced gains in the broader market, shares of others -- including Toll Brothers, Lennar and PulteGroup -- are down year-to-date. But shares were up across the sector in early trading Tuesday on the report.