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Conditions ripe for new starts, is the building industry inching toward its new normal?


Explaining the upward trend in new building starts is a complicated task, but a Cliffs Notes version might go a little like this:

While taking advantage of record-low mortgage rates, prospective buyers have gobbled up foreclosures and existing homes the same, leaving markets across the country with dwindling inventory amid ever-increasing demand. So, prospective buyers are building.

As Nick Timiraos of the Wall Street Journal points out, the latest numbers indicate a market landscape ripe for new starts for both the single-family and multifamily categories:

1. Multifamily housing starts accounted for the highest share of overall housing starts, at 30%, since 1986, when the U.S. experienced overbuilding in the apartment sector.

2. Multifamily construction in 2012 was more than double the rate of 2009 and 2010 combined, at 233,400 units.

3. Single-family housing starts ended the year at 535,500, which is the fourth lowest since record keeping began in 1959, but a hefty 24% above last year’s level, which was the lowest on record. In other words, construction is very low, but it is beginning to pick up the pace.

4. December’s rate of new construction, which hit a seasonally adjusted annual level of 954,000 total units and 616,000 single-family units, stood at the highest level in 4½ years.

5. New housing unit completions are up only 11% from 2011, notes Jed Kolko, chief economist at Trulia, which is below the 28% gain in new construction starts. “That means many of the homes started in 2012 won’t be completed until 2013,” he writes.

 The big caveat, of course, is while these numbers compete with 2008 numbers before the bottom dropped out, they pale in comparison to the decades prior to the housing bubble.

Could it be we’re inching toward the building industry’s new normal?