Joe Chamberlain says he can’t build homes fast enough to keep up with demand. The founder of Caprock Custom Construction Inc. in Rockwall, Texas, has yet to break ground on any of the three houses he sold in May and June.
That’s “an excellent position for a builder to be in,” said Chamberlain, who already has three homes under construction and is just starting work on another. “It ensures we’ll stay busy for a long time and make a profit.”
Almost 36% of all U.S. new homes sold in May weren’t yet under construction, close to a seven-year high and signaling sustained strength in homebuilding as companies try to catch up. That in turn will trigger purchases of everything from cement and lumber to furniture and appliances, bolstering hiring and economic growth, economist Neil Dutta predicts.
“There’s clearly more housing starts activity in the pipeline,” said Dutta, head of U.S. economics at Renaissance Macro Research LLC in New York. “The economic outlook is getting better and there’s more household formation. With demand rising, production is going to follow.”
Of the 45,000 new houses sold in May, construction hadn’t yet begun for 16,000, according to Commerce Department data. The share of yet-to-be-built dwellings was up from 26% a year ago and from a recession low of 14% in September 2008.
The outlook for housing has helped drive the Standard & Poor’s Homebuilding Index up 31% in the past year, outpacing the S&P 500 Index’s 19% gain. In today’s trading, the S&P 500 rose 0.5% to 1623.28 as of 10:43 a.m. in New York.
Orders placed with U.S. factories rose 2.1% in May, reflecting broad-based gains that signal manufacturing is stabilizing, Commerce Department figures showed today. The Reserve Bank of Australia, which has cut its benchmark rate by 2 percentage points since November 2011, left borrowing costs unchanged today at a record-low 2.75%. Governor Glenn Stevens said in a statement accompanying the decision that “the economy has been growing a bit below trend over the recent period.”
In the U.S. since 2008, residential construction has averaged fewer than 700,000 single- and multi-family units per year, of which about 300,000 a year were to replace obsolescent dwellings, according to Stuart Miller, chief executive officer of Miami-based Lennar Corp. Even a jump to about 950,000 new dwellings in 2013, “a significantly stronger year of building activity,” would still be below the nation’s need of 1.2 million to 1.5 million a year, he said.