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Builders Race to Keep Up With Surging U.S. Home Demand
Shobhana Chandra / Bloomberg / July 2, 2013
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 percent 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 percent a year ago and from a recession low of 14 percent in September 2008.
The outlook for housing has helped drive the Standard & Poor’s Homebuilding Index up 29 percent in the past year, outpacing the S&P 500 Index’s 18 percent gain. The S&P 500 fell 0.1 percent today to close at 1614.08 in New York.