1 Big Problem With the 2012 Housing Recovery
The improvement in the housing sector was one of the success stories of 2012, bringing with it hopes of an improving economy and anticipation for all the construction jobs that would soon materialize. While the nascent rebound has begun adding to the gross domestic product for the first time in six years, it still hasn't contributed in a positive way to the depressing jobs picture.
Who is building all those new houses?
This is weird, since October's numbers showed that housing construction had increased by 42% from last year. That's nothing to sneeze at, and you would be excused for thinking that hiring in the sector would have ticked up somewhat. But, a look at the graphs presented on NPR's Planet Money shows the truth: Job creation in the construction business moved up not a whit, and hasn't since 2010. Even the Bureau of Labor Statistics notes that there has been no real change in those employment numbers in the last two years.
How can this be? Questioning minds other than mine have made the same query, and a few answers have been proffered. One is that housing contractors are waiting to make sure that the boom is real before hiring on more employees. Another is that the rebound has been strongest in the multi-family sector, which requires fewer hands than single-family dwellings.
Still, seasonally adjusted housing starts for last month came in at 861,000 -- and this was considered artificially lowered due to the effects of Superstorm Sandy. The same number for November 2011 was 708,000, and November 2010 was recorded as 555,000 . That's forward motion in my book, no matter how iffy the rebound might look to homebuilding companies. Additionally, of those 861,000 starts, 565,000 were for single family units.
Rising construction numbers floats homebuilders' boats
One thing is certain: Large homebuilders in particular have been feeling the love emanating from increased housing activity. The SPDR Homebuilders ETF index has gone up nearly 54% over the past year, and big home construction companies have also seen their stocks rise, right along with their profits.
PulteGroup made a strong showing last quarter , with new orders rising 27% year over year and net income of $117 million compared to a loss last year of $129 million. KB Homes and Hovnanian Enterprises also turned in some stellar numbers recently, as KB upped its revenue by 20% and Hovnanian saw an increase of over 42%. Even laggard Beazer Homes pumped up revenue by nearly 11%, and increased new orders by about 10% over last year.
One Fool's take
While I still wonder about the lack of employment recovery in the sector, others are more sanguine. A recent article in the Wall Street Journal notes that changes such as longer work weeks for construction crews and the uptick in single-family building permits are harbingers of a need for more workers. Others cite the fact that new household formation is accelerating for the first time since the downturn, and is currently outpacing that of housing starts -- a sure trigger for more home construction and, presumably, more construction jobs.
The National Association of Homebuilders has said that for every new home built, three new, full-time jobs are created. Let's hope that 2013 proves them right.
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The article 1 Big Problem With the 2012 Housing Recovery originally appeared on Fool.com.Fool contributor Amanda Alix has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.