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US builders battle to meet increased demand

Sunday, 28 July 2013 11:14
The requirement for new US homes continues to grow with builders finding it difficult to keep pace with demand.

According to David Crowe, chief economist at the National Association of Home Builders, they are also being frustrated by the obstacles, they claim, they are facing which include a shortage of labour and materials and the limited access to capital.

Crowe believes that these constraints, that are the outcome of the recession, will gradually turn around as the industry increases its new home output. Crowe estimates that new build starts in 2013 will be 150,000 up on that of 2012 and given that each home start is likely to generate at least three jobs that gain is getting close to providing almost half a million jobs to boost the sector and the overall economy.

Stuart Miller, chief executive of Miami based Lennar Corps one of the nation’s leading constructors of quality homes points to the period since 2008 where fewer than 700,000 single and multi-family units were being built each year and that of those around 300,000 a year were to replace obsolescent dwellings. “The overriding driver of recovery in the housing market remains the underproduction of both single and multifamily product throughout the economic downturn and up to and including this year,” said Miller, “This shortfall will have to be made up.” He suggests that even if new home construction achieves a significant jump to 950,000 new dwellings in 2013 it will still be short of the nation’s requirement which he believes may be nearer 1.5 million each year going forward.

As we know new builds are great for the economy. Apart from the creation of jobs they trigger purchases for all kinds of building materials, furnishings and appliances.

“There’s clearly more housing starts activity in the pipeline,” said Neil 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.” However demand is still outstripping availability; of the 45,000 new houses sold in May construction has only begun on around 30,000 according to the Commerce Department recent data who also say that the share of yet-to-be-built dwellings is up from 26% one year ago and from the 14% low that was experienced at the low of the recession in the fall of 2008.

Some construction companies have been surprised by the increased demand for new homes and consider many buyers are returning to the new-home market as large pools of investors buying existing homes have depleted already-low supplies of houses, said Jay Moss, chief marketing officer of Woodside Homes in Salt Lake City, Utah. “In many cases we have sold most of the homes before we’ve started,” Moss said. “Woodside expanded staff in the past year, and now that we’re getting busier, we need more people, we have ramped up production,” he said. “We didn’t think sales would be so strong.”

If we needed any further confirmation of the strength of this market it comes from Tim Kane, president of MBK, which is financed by the U.S. real-estate development unit of Tokyo-based Mitsui & Co. Ltd. “Unquestionably, things are picking up compared to even six months ago, and certainly compared with a year ago all price ranges are seeing demand”. Adding, “For the next few years, there’s going to be a lot of building activity”.

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