Increase in US Home Construction in 2023 Signals Robust Market Recovery

New home construction jumps, raising hopes for better housing market Census Bureau data for showed the pace of starting new homes ramped up more than expected in November.

Recently, there’s been an increase in US home construction. The Census Bureau shared some news that in November of 2023, the number of new homes starting to be built (called “housing starts”) went up a lot, even more than people thought it would. They said that compared to last year, there was a 9% increase overall, and a bigger increase, 18%, for houses meant for just one family. This is really good news for people who build homes because they’ve had a tough time since the pandemic started

“The agency says housing starts rose 9% from a year ago, primarily because of an 18% increase in starts on single-family houses.” -Census Bureau

US single-family homebuilding surges in November | REUTERS

Economic Implications

Economists thought that the number of new homes being built would be lower, around 1.36 million in total. But the real numbers were higher, showing that the housing market is bouncing back more strongly than they expected. This big increase in home construction is likely to help the economy a lot in 2024, possibly making the whole economy grow more.

“Economists expected a significantly lower rate of 1.36 million total homes.” -NBC News

Such robust growth in home construction is anticipated to have positive ripple effects on the economy in 2024, potentially bolstering overall economic growth.

November 2023 saw a surge in US housing. Learn what's behind this big increase in home building.

Surge in US Housing: A Close Look at the November 2023 Boom

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Housing Demand and Supply Dynamics

The demand for housing has been exceptionally high since the COVID-19 pandemic, driven by various factors, including more millennials starting families and the shift to remote work. However, supply chain disruptions and fluctuating mortgage rates have complicated the supply side of the equation, underscoring the importance of the recent increase in construction activity.

increase in US home construction — Since the COVID-19 pandemic, the demand for houses has soared due to more millennials having families and working from home, but challenges like supply chain issues and changing mortgage rates have made it harder to supply these homes.

The Buyer’s Market

Lately, the cost of borrowing money to buy a house (mortgage rates) has gone down, and builders are offering special deals. This has made more people excited about buying houses. It’s become easier for people to afford a new home, which means more people are looking to buy. This increase in people wanting to buy homes is helping the market get even busier.

The Future of Home Construction

Industry experts, like Lawrence Yun of the National Association of Realtors, emphasize the ongoing need for more construction to address housing shortages.

“Even more homebuilding will be needed with the housing shortage persisting in most markets,” notes Yun.

This sentiment is echoed by others in the field, highlighting the necessity for sustained growth in home construction to meet ongoing demand.

Investment Perspective

From an investment point of view, there are a lot of positive feelings about the homebuilding industry right now. The stocks of big companies that build houses are doing better than the overall stock market. This shows that investors believe these companies will continue to grow and do well in the future.

Conclusion: What Does the Increase in US Home Construction Mean?

The increase in US home construction is a promising sign for the housing market and the broader economy. As the sector responds to high demand and navigates supply challenges, its growth trajectory is crucial for economic stability and growth.