WASHINGTON -- A surge in apartment construction gave homebuilders more work in November. And permits, a gauge of future construction, rose 5.7 percent, spurred by a jump in apartment permits.
The 16 percent rise in permits provides hope for the housing market, though 2011 is still shaping up as one of the worst years in history for homebuilders.
The Commerce Department says builders broke ground on a seasonally adjusted annual rate of 685,000 homes last month, a 9.3 percent jump from October. It's the highest level since April 2010. Still, the rate is far below the 1.2 million homes that economists say would be built each year in a healthy housing market.
"While beginning to improve, a strong, sustained recovery in the housing market, especially the important single-family sector, is still a ways off," said Steven Wood, chief economist at Insight Economics.
Demand Still Weak
Last year, builders began work on roughly 587,000 homes, the worst year on record. This year, construction may top 600,000.
Though new homes represent just 20 percent of the overall home market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.
Renting has become a preferred option for many Americans who lost their jobs during the recession and were forced to leave their houses. The surge in apartments has provided a lift to the beleaguered housing market but has not been enough to completely offset the loss of single-family homes.
Over the past year, permits for apartment buildings with five or more units have surged more than 80 percent. Permits for single-family homes, which account for about 70 percent of all homebuilding, have increased just 3.6 percent.
Demand for new homes is weak. Record-low mortgage rates and plunging home prices have done little to help.
The chief problem: Builders are struggling to compete with deeply discounted foreclosures and short sales. Short sales occur when lenders allow homes to be sold for less than what's owed on the mortgage. Few homes are selling.
After previous recessions, housing accounted for at least 15 percent of U.S. economic growth. Since the recession officially ended in June 2009, it has contributed just 4 percent.
In October, sales of new homes rose slightly, largely because builders cut their prices in the face of weak demand. Sales hit a six-month low in August. And this year is shaping up to be the worst since the government began keeping records a half-century ago.
Another reason sales have fallen is that previously occupied homes have become a better deal than new homes. The median price of a new home is about 30 percent higher than the median price for a re-sale. That's nearly twice the markup typical in a healthy housing market.
The homebuilders' trade group said this week that its survey of industry sentiment rose in December to 21, the highest level since May 2010. Still, any reading below 50 indicates negative sentiment about the housing market. The index hasn't reached 50 since April 2006, the peak of the housing boom.
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As you might expect in the country's most expensive city, New York residential real estate has the highest conforming loan limit allowed under law, $729,750. While in the chicer parts of Manhattan that'll get you beans, if you're willing to live a little south of the action, you can snatch up an apartment like this three-bedroom -- for only 3.5 percent down.
The country's second biggest -- and notoriously traffic-plagued -- city is also just about as expensive as it gets. Awesome views of Beverly Hills, Wilshire Blvd. and the mountains beyond are the highlight of this classy apartment.
This apartment's building is set on a 3.5 acre lot that offers a pool, tennis court and fitness center. There's also valet parking and a concierge. But if you have pets... well, that's OK! The listing boasts of the building's "rare pet friendly environment."
Chicago's conforming loan limit is substantially lower than those of Los Angeles or New York. At $409,000 this duplex flirts with its FHA-loan ceiling. The apartment's kitchen has a cherry-stained inlay floor with a breakfast bar.
Our country's fifth largest city doesn't have property values as high as you might think. The relatively low median sale price of $305,000 pulls the FHA conforming loan limit down to $420,000. That delivers one bedroom and one bathroom in the case of this contemporary apartment. Is the stunning skyline looming outside the apartment's floor-to-ceiling windows worth that sum? Your call.
The Loan Star State's real estate comes pretty darn cheap and Houston dirt is no exception. The FHA will only insure your loan up to $271,050. But, considering bang-for-your-buck value in the state, that means the government will sponsor some pretty comfortable digs. This 2,791-square-foot traditional home offers four bedrooms on its well-landscaped plot. If the place strikes a chord with you, be sure to make the open house this weekend. See the listing for details.
Think back to that stylish Philly apartment. You know, the one-bedroom that cost in the neighborhood of $400,000? Now consider that this home's living room alone probably comes somewhere close to rivaling that apartment in total size. A reminder of just how much location determines value.
Located on a cul-de-sac, this Phoenix home offers four bedrooms. At $345,500 it's priced close to $150,000 above the median sale price, allowing relatively well-heeled borrowers to take out substantial loans for as low as, you guessed it, 3.5 percent down.
While the space may distinguish this home on paper, the home's interior really seems to set it apart. There are stone-arched doorways, exposed-beam ceilings and black hardwood floors. All of it potentially attainable for just 3.5 percent.
Ravaged by the foreclosure crisis, Jacksonville real estate values have plummeted over the last few years, allowing deals like this large single family. Priced at $379,900, the home is just shy of the point where the government steps back and says: "It's 20 percent from here on out."
Who knew you could find a glass-enclosed pool just yards from a pond on a property below $400,000. An amenity like this, plus the home's exquisite, varnished interior should be a reminder that today's market is, undoubtedly, a buyer's one. Worried you're not up to financial snuff? In case you didn't hear, you can buy a lot of homes like this one for just 3.5 percent down.