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Housing Starts Soar

The National Association of Realtors recently released housing data indicates housing starts reached an 894,000 annualized pace in October, which is the highest in over 4 years and up 42 percent from one year ago.

The National Association of Realtors recently released housing data indicates housing starts reached an 894,000 annualized pace in October, which is the highest in over 4 years and up 42 percent from one year ago.

Even with this huge gain, further increases are needed. The 50-year historical average is 1.5 million per year. Now that household formations are increasing housing starts need to be at least 1.3 million just to keep the overall vacancy rates stable.

Multifamily starts made a larger gain of 57 percent compared to single-family starts, which increased 35 percent. Falling vacancy rates and solid rent gains have tipped developers to focus more heavily on new apartments.

The West region showed the biggest increase with a 73 percent gain. The northeast experienced a slight downturn over the month and only an 11 percent gain from one year ago. Since Hurricane Sandy was at the very end of October, the lower starts are attributed to market forces in the region and not yet related to the storm. A large overhang of shadow inventory still looms in New Jersey, New York, and Connecticut.

Housing starts are likely to reach 1.1 million in 2013 and then rise to 1.4 million in 2014. These levels will still be not enough to meet the rising housing demand. Shortage conditions are expected to continue for several years.

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