Housing Market Recovery Rolls On as Groundbreaking Rises

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Housing Starts
Daniel Acker/Bloomberg via Getty Images
By Jason Lange

WASHINGTON -- U.S. housing starts and permits rose in September, a signal the market's modest recovery is supporting what appears to be growing strength in the broader economy.

Groundbreaking rose 6.3 percent to an annual 1.02 million unit pace, the Commerce Department said Friday.

Economists polled by Reuters had forecast a slightly smaller gain.

Housing is clawing back after it imploded during the 2007-2009 financial crisis and recession. It suffered a setback last year when interest rates spiked, but rates have been falling lately.

The average 30-year mortgage rate dropped last week to its lowest level since June 2013, and the level of housing starts is not far from a seven-year high.

"If you look at the trend, you are still seeing an upward trajectory," said Michelle Meyers, an economist at Bank of America Merrill Lynch in New York.

U.S. stock futures jumped following a batch of solid corporate earnings reports and on hopes the Federal Reserve might slow the winding down of its stimulus in light of recent weakness in the global economy. Yields on U.S. government debt, however, extended gains after the release of the housing data.

New housing starts for single-family homes, the largest part of the market, rose 1.1 percent in September, while the more volatile multifamily homes segment jumped 16.7 percent.

Permits advanced 1.5 percent to a 1.02 million unit pace last month.

-With additional reporting by Richard Leong in New York.

Does Your Home Live Up to the American Average?
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Housing Market Recovery Rolls On as Groundbreaking Rises
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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