Housing Starts Jump To A Four Year High

Housing Starts Jump To A Four Year High
Photo by lj16

Housing starts- which represent the number of new residential construction projects that have begun in a given period-rose a further 3.6 percent in October, signaling a four year high after increasing from 15.1 percent in September. The 894,000 units annualized in October underscored the upward trend in housing that was highlighted in the official third quarter economic report that highlighted a 15 percent rise in housing.

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Housing Starts Jump To A Four Year High
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The rise was primarily attributed to an increase in multi-family starts, which came in at 300,000, signaling an 11.9 percent gain and spearheading the rebound. Single-family starts were relatively flat at 594,000 units, following a windfall gain last month. It has also been noted that home ownership rates have fallen and that the increase in demand for apartments has pushed rental vacancy rates down.

Another key highlight is the number of single-family starts that have been designed for sale- with the figure coming in at an estimated 70 percent of all the single-family starts. New single-family unit sales came in at 389,000, representing some consistency with the inventories of unsold homes. Nevertheless, prospects for large near-term extensions of the rebound in single-family starts are still low. These low prospects are aided by the fact that supply of unsold single-family homes is still low. Similarly, most buyers are being sidelined by strict mortgage lending conditions.

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Morgan Stanley believes that multi-family starts will continue trending upwards in subsequent periods. Foresights from Morgan Stanley suggest that underlying domestic household formations will run about 1 million a year over the next decade. The bank further notes that immigration will greatly contribute to the underlying housing formations.

Win-win situation for the economy

Amid the overall improvement, Morgan Stanley (NYSE:MS) has been able to place a finger on one particular trend- residential investment’s huge growth in September. The September growth, which was partially offset by low mortgage rates and improvement in the job market, has created a win-win situation for the economy, as companies in the housing sector are expected to expand their operations in coming periods. Similarly, the stir in the industry is expected to create a lot of jobs.

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