May Home Construction Outlook Contains Some Positives

on . Posted in US and local economic forecasts

It's easy to dismiss the most recent figures from the U.S. Department of Commerce about home construction numbers as negative. After all, a 6.5 percent drop in overall starts is clearly a reduction from April, when construction started on 1.07 million new homes. Newsday pointed out the drop equates to 60,000 fewer homes being built, and fewer projects mean fewer construction jobs. However, viewing the numbers from a pure volume of construction starts means missing a fact highlighted by MarketWatch: The number of permits issued to begin construction rose significantly in May, gaining 3.7 percent from April. Additionally, the confidence interval for that 6.5 percent reduction was 10.2 percent, which is the statistically precise way of saying the Department of Commerce isn't entirely sure if construction numbers actually decreased or not.

MarketWatch provided the reminder that a single month of increases in permitting doesn't mark a trend, but the marked jump as the seasons change and weather improves across the country is likely good news for contractors. More construction projects of all kinds take place across the country during the warmer seasons, as crews aim to take advantage of longer daylight hours and more hospitable temperatures. Because many contractors, especially those in colder climates, rely on increased workloads in the summer, the uptick in overall home construction is a good sign overall.

Home Construction Slowly Recovering
Although there are still hurdles to overcome until the construction industry reaches pre-Great Recession levels of overall productivity, the trend of slowly growing home construction rates are a positive. In a recent economic forecast from MarketWatch, homebuilder confidence showed a five-month high that indicates both a recovery from the seasonal swing of construction and other factors. The index, put together by the National Association of Home Builders and Wells Fargo, currently sits at 49 points. This means the industry is almost evenly divided on whether they have a positive outlook for future construction in the short term.

Because economic recovery has generally been slow, many contractors are hedging their bets by slowly and cautiously adding inventory and employing additional workers. This slow return to normalcy from the depths of the Great Recession is less than ideal, but it indicates positive, although slow, growth in the home construction industry. While many builders would rather have already experienced a complete righting of the economic ship, the generally positive growth in home construction numbers is a good outlook for the future.


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