Shares of homebuilders jumped sharply in Wednesday’s session after the construction market in the US is growing by leaps and bounds at a record-breaking rate as seen in the last 4 years. MarketWatch reported that analysts had originally predicted a figure of 770,000 for construction of new homes, but the figure ultimately came to 872,000 last month at a jump of 15%.
Construction on brand new single-family homes and multi-dwelling units such as condos and townhouses went up 11% and 25% respectively in September. The former constitutes around three-quarters of the housing market, with the latter not displaying any continuous trend so far, even if the growth rate looks good as of now.
Building permits requested are also on a high, with a climb of 11.6% to an annual rate of 894,000 after a slight slump in August to 801,000. Single-family homes went up 6.7% to an annual rate of 545,000 and multi-dwelling permits climbed 20.3% to 349,000 last month. All regions except the Northeast are indicating that the housing market is recovering after several years of crisis, with the West and South experiencing an increased demand of 20%.
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The factors contributing to the sudden demand in housing are: the foreclosure crisis fading out, improved economy, and interest rates that are at a record low. In spite of the brilliant turnaround, the growth rate at 35% as compared to last year, has not been able to catch up to the figures in its glory days. Housing demands easily crossed 2 million each year back then. Steve Blitz, chief economist of ITG Investment Research, is not too hopeful about real estate market due to the high unemployment rate of 7.8% in the
and a sluggishly growing economy.
Even so, the housing market contributed 0.2% to the growth rate of the
economy of 1.3%, without which, the rate would stand at 1.1%.
Publicly home builders like Meritage Homes, KB Home, and D.R. Horton are having a field day due to the improved real estate market and home-builder stocks doubling and tripling profits over the last year. Manufacturers of building materials have also done well such as Simpson Manufacturing and Owens Corning, which have gone up 25% and 23% respectively.
Hovnanian Enterprises, Inc.(NYSE:HOV) soared 10% to $4.16 and made a new 52-week high of $4.19, KB Home(NYSE:KBH) rose 10% as well to a new 52-week high of $16.96. D.R. Horton, Inc.(NYSE:DHI) added 4.30% to $21.57, Beazer Homes USA, Inc.(NYSE:BZH) surged 6% and The Ryland Group, Inc.(NYSE:RYL) climbed 4.61%.