Housing Starts Fall; Prior Month's Data Revised Higher

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Housing Starts
Daniel Acker/Bloomberg via Getty Images
By Lucia Mutikani

WASHINGTON -- Housing starts and permits fell in August, but upward revisions to the prior month's data suggested the housing market continued to gradually improve.

Groundbreaking declined 14.4 percent to a seasonally adjusted annual 956,000-unit pace, the Commerce Department said on Thursday. July's starts were revised to show a 1.12-million unit rate, the highest level since November 2007, instead of the previously reported 1.09-million unit rate.

Economists polled by Reuters had forecast starts slipping to a 1.04-million unit rate last month.

Housing is clawing back after suffering a setback following a spike in mortgage rates last year. It, however, remains constrained by a relatively high unemployment rate and stringent lending practices by financial institutions.

A survey Wednesday showed homebuilder sentiment hit its highest level in nearly nine years in September and builders reported a sharp pick-up in buyer traffic since early summer.

Groundbreaking for single-family homes, the largest part of the market, fell 2.4 percent in August to a 643,000-unit pace. That followed a hefty 11.1 percent increase in July.

Starts for the volatile multifamily homes segment tumbled 31.7 percent to a 313,000-unit rate in August.

Last month, permits fell 5.6 percent to a 998,000-unit pace. July's permits were revised slightly up to a 1.06-million unit rate. Economists had expected them to slip to a 1.05-million unit pace in August.

Permits for single-family homes fell 0.8 percent to a 626,000-unit pace in August. Permits in the U.S. South, where more than half of single-family construction occurs, hit their highest level since April 2008.

Permits for multifamily housing declined 12.7 percent to a 372,000-unit pace.

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Housing Starts Fall; Prior Month's Data Revised Higher
In 2013, the median lot size of a new sold single-family house was 8,596 square feet, or just under 0.2 acres. While that might not seem like a lot for you suburban homeowners, a regional breakdown shows that the small average size isn't due to urban inhabitants alone. The Northeast enjoys the largest average lot, at 13,052 square feet, while the less densely populated South and West lay claim to just 8,649 square feet and 6,796 square feet, respectively.
From a footprint of 1,650 square feet in 1978, the average American home has grown 50 percent, to 2,478 square feet. Yet tough times seem to be squeezing our expansionary attitude. Although new single-family homes sold in 2013 clocked in at a median 2,478 square feet, single-family homes completed in 2013 amounted to just 2,384 square feet. Homebuilder confidence has plummeted into pessimism in the last few months, hinting that the housing market's road to recovery might be rougher than expected.

While birth rates have held relatively steady for the past 40 years, everyone apparently needs more elbow room. The share of homes with four or more bedrooms has jumped from 27 percent in 1978 to 51 percent in 2013. And where would a bedroom be without a bathroom? While just 8 percent of 1978 homes had three or more baths, 37 percent of homes now fall in that category.

From 2008 to 2013, both the share of homes with four or more bedrooms and the share of homes with three or more bathrooms have jumped 10 percentage points, while median square footage is up 10.9 percent for the same period.
 

If there's one strong sign of new housing demand, it's home prices. After nose-diving during the Great Recession to a median sales price of just $216,700, home prices have been roaring back up. In 2013, the median sales price for a new single-family home was $268,900. But for those on the housing hunt, don't be discouraged. Home prices today still don't hold a candle to costs in 2006, according to the well-regarded Case-Shiller Home Price Index. In 2006, the index topped 200 before plummeting to less than 140, and current rates put the index just above 170.
It is America, after all. Our industrialized nation was built on the back of Henry Ford, and America is in no danger of breaking its automobile addiction. In 2013, a whopping 300,000 of the 429,000 new single-family homes sold included a two-car garage. And 98,000 new homes included a three-car garage -- the highest amount since 2007. Of all new homes built, only 10,000 failed to include a garage or carport.
American homebuyers are building bigger homes than ever before. But if there's one thing the recent recession has shown us, bigger isn't always better. Although 30 percent of Americans believe real estate is the best long-term investment, homeownership isn't for everyone. There are plenty of reasons to spend less or invest elsewhere -- and leave keeping up with the Joneses to Mr. and Mrs. Smith.
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