The housing recovery we have been forecasting for more than a year continues apace. Today’s data revealed that housing starts are up nationwide 0.8%, with building permits up 4.6% in February. We are now at the highest levels since 2008.
At some point, more people will realize that their homes may no longer be “under water”, and others will realize that this is the most favorable market to sell a home in years, with inventory of existing homes for sale as close to zero as we will ever see.
This week’s numbers are in some ways misleading, given the incredible surge which continues in multi-family housing starts. This is inflating the new starts number. An early warning sign: Fannie Mae and other investors are reportedly reducing their commitment to buy or lend on multifamily projects. The low interest rate environment has made investor hurdle rates much lower than had been necessary to justify investment in the past; this is driving prices and demand higher. Given the lengthy acquisition, development, and construction process, there is some fear that commitments which look great today may not be as attractive when the projects are set for occupancy. But for now, the demand is swamping existing supply in multifamily units, driving new starts.
March 19, 2013