Housing starts mean new homes, but without picket fences

Mark Garrison Jan 17, 2013
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Housing starts mean new homes, but without picket fences

Mark Garrison Jan 17, 2013
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The Commerce Department reported that builders broke ground on houses and apartments at the fastest pace since 2008. It’s further indication that the housing market may be starting to make a comeback — but the new homes being built don’t necessarily come with a ‘for sale’ sign out front.

Instead, new rental properties are responsible for the unexpectedly strong housing numbers, which show construction up 12 percent from last month.

“The rental market has strengthened so much, as people have not been able to actually buy their first home out their — or have actually been forced to move out of homes that they had foreclosed upon, ” said Diane Swonk, chief economist at Mesirow Financial. “In fact, the strongest gains in multi-family construction are in the areas of the country where the subprime crisis was the hardest.”

But, Swonk added, investors who buy property to rent aren’t typically going to splurge for the fancy new expensive refrigerator or top-of-the-line lighting system if they aren’t going to be living their themselves.

“The multipliers on spending are much less when we see it in rental properties,” said Swonk.

Nonetheless, Swonk says the market coming back is a positive sign and it’s already starting to help a sector of the economy that has been dormant for a long time.

“Not only will we see construction coming back, but the manufacturing jobs related to this industry coming back,” Swonk said. “And also a lot of investment in new equipment and upgrades as they retool and reopen these plants that have been idle since before the financial crisis actually broke.”

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