Housings starts remained steady in February, but the increase in buildings permits issued could signal a healthier market in the coming months.
Starts dipped 0.2 percent from January, down to 909,000 according to the new residential construction report released on Tuesday by the Commerce Department. Meanwhile building permits went up 7.7 percent from January, with over a million units anticipated to be constructed this year.
The housing market index released a day before showed that builder confidence went up one point since January.
Despite the these promising numbers, the National Association of Home Builders cites obstacles for future construction.
“A number of factors are raising builder concerns over meeting demand for the spring buying season,” said NAHB Chief Economist David Crowe in a statement. “These include a shortage of buildable lots and skilled workers, rising materials prices and an extremely low inventory of new homes for sale.”
Indeed, despite the fact that over 150,000 construction jobs wereadded to the U.S. economy over the past year (just 15,000 in February), even people in strong housing markets like Texas are concerned about skilled labor shortages.
“Even though Texas is leading the nation in job growth, the labor shortage [in construction] here is exacerbated by the oil boom,” said Scott Norman, executive director of the Texas Association of Builders.
However, he maintained that overall, Texas, has remained “the least sick of all patients” in the nationwide housing market. He added that the state is back to 2003 levels, and suggested that a steady increase would be better than any vertical growth.
Similarly, neighboring state Arizona has also seen strong economic growth, and as of late, in housing. Evan Fuchs, president of the Arizona Association of Realtors, is looking forward to the high season. The reason for the anticipated growth is big companies like Google, Apple, and Tesla moving into the state, promising to create more jobs.
As for housing, Fuchs said that he has seen “some wild swings in prices and unit sales” but they’re now getting into a normal market.
“Nationally, there’s been an modest price growth in home prices, which makes sense with the market,” he said.
The latest Case-Shiller home price index showed that there was a 0.3 percent dip in real estate prices nationally through February. However, the Federal Reserve came out with a report a month before the figure was released which states that the index is not the most accurate measure. This is because the indexes are reported with months of delay, yet the stock market is immediately affected once the numbers are released.
Instead, the Fed introduced the idea of a new “list-price index”, which uses listings data (obtained from real time) as opposed to transactions data (which can take a while to get).
For the time being, investors in markets that have remained consistently strong are looking forward to what seems to be a promising year. Armando Montelongo, a real estate mogul, expects change to come in the next four to six weeks.
He speculates that because there are so many frustrated prospective home buyers who have kept away from the market because of the harsh weather, prices are going to spike once everyone starts shopping at the same time.
“This summer, I’m predicting a phenomenal buying tide and selling tide in the housing market,” he said.