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January 23rd, 2014

More new homes still aren’t enough to ease inventory woes



iStock_New ConstructionHomebuilders have stepped up production of for-sale houses, but in a cautious and measured way that might not be enough to ease supply constraints in some markets, judging by recent reports from the National Association of Home Builders (NAHB) and the U.S. Census Bureau.

The NAHB reported that homebuilding nationwide declined 9.8 percent to 999,000 units in December. That figure is seasonally adjusted to account for the slower pace of construction in winter and annualized to represent how many homes would be completed if the monthly pace continued for a year.

NAHB Chief Economist David Crowe said in a statement that 2013 was a good year for home building as production was up 18 percent compared with 2012.

Permits, completions pause

The U.S. Census Bureau reported that builders obtained new permits at a seasonally adjusted and annualized pace of 986,000 housing units in December. That pace was 3 percent lower than the revised November rate of slightly more than 1 million, but 4.6 percent higher than the December 2012 estimate of 943,000.

The seasonally adjusted annualized pace of housing completions in December stood at 744,000 units, a 10.8 percent drop compared with the revised November estimate of 834,000, the Census Bureau reported.

The Census Bureau numbers include permits for both single-family and multifamily housing units.

Slow construction squeeze

Lawrence Yun, chief economist at the National Association of Realtors, has said repeatedly that the slow pace of construction is squeezing post-recession housing markets.

“Home sales are hurt by higher mortgage interest rates, constrained inventory and continuing tight credit,” Yun said in a NAR statement. “There is a pent-up demand for both rental and owner-occupied housing as household formation will inevitably burst out, but the bottleneck is in limited housing supply, due to the slow recovery in new home construction.”

Supply constraints put upward pressure on home sales prices and rents at the end of 2013. Both prices and rents rose last year at a faster pace than had been seen in several prior years, Yun added.

More new construction could be good news for buyers in some areas, though pickings might still remain slim for some time.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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