Published on : Oct 21, 2015
What can be viewed as an indication that the housing market in the United States is steadily improving despite the slow economic growth, housing starts in the country increased more than anticipated last month owing to surging demand for rental apartments.
It was the sixth consecutive month that housing starts stayed above the 1 million units mark, signifying a sustainable recovery of the housing market. In August, housing starts rose to reach a 1.13 million unit level.
Economists surveyed by Reuters had predicted that groundbreaking on new homes would increase to a 1.15 million unit rate in September.
The housing sector is one of the few areas in the overall economy that appears to seem like a bright spot. The economy in the country has been slammed by a strong dollar and a soft global demand. This in turn, has resulted in undercutting exports, weak capital spending in the energy market, and efforts by various businesses to minimize an inventory bulge.
Economic activity has come to a sharp stand still and growth estimates in the third quarter are currently at an annualized rate of below 1.5 per cent. In the second quarter of the year, the US economy developed at a rate of 3.9 per cent.
Even construction of residential units makes up for less than 3 per cent of the GDP, housing has a much larger impact on the overall economy as the rise in home prices is propelling household wealth and thereby aiding consumer spending.
Housing starts in the South, where maximum construction activity takes place, went up 0.6 per cent to the highest level since 2007 in October. In the West, groundbreaking on housing projects were reportedly the highest since July of 2007.
Even though building permits dropped to a 1.10 million unit rate last month presenting a 5.0 per cent fall, the weakness is projected to be temporary in the midst of strong levels of confidence among home builders.