Construction companies built more apartment complexes in September, sparking a temporary rise in housing starts for a real estate market that otherwise appears to have crested during the summer. Housing starts last month rose 6.5% to a seasonally adjusted annual rate of 1.21 million homes, the Commerce Department said Tuesday. But a 17% surge in multi-family housing — which includes apartments — accounts for almost all of that increase.
New construction and sales of existing homes surged in the first half of the year as more Americans found work and the unemployment rate dipped to a solid 5.1%. But tight inventories, rising prices and the absence of meaningful wage growth have capped growth as affordability has become an issue — a problem that new construction can help resolve. “Builders are stepping up to meet that demand but doing so cautiously,” said Stephen Stanley, chief economist at Amherst Pierpont Securities. “So, for beleaguered buyers who can’t find what they are looking for because of a dearth of listings, there is a bit of help on the way.”
Construction rose last month in the Northeast, South and West, while falling in the Midwest. Housing starts have soared 12% in the first nine months of 2015. But the pace of building retreated from its June apex, in part due to the expiration of tax incentives for developers in New York.
Approved permits fell 5% in September to an annual rate of 1.1 million, a sign that construction will likely slow in the coming months. Sales of existing homes similarly accelerated through the start of the summer, only to decline in August. The tight inventories — just 5.2 months’ supply of homes were listed for sale — have propped up prices, as the median cost to buy a home increased 4.7% over the year to $228,700, according to the National Association of Realtors.