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Home construction levels soar to four year high

Home construction hit a high note in February, but what other factors will lead housing into a healthy recovery?

home construction

Home construction soared to four year high

According to the U.S. Commerce Department, spending on construction rose 1.2 percent overall in February compared to January, after a 2.1 percent drop from December. Private residential construction rose 2.2 percent in the month, and while the gain in February does not make up for the dip in January, the silver lining in the Department’s news is that home construction rose to levels not seen in over four years.

Construction spending has been a bouncing ball in recent months, but February’s numbers represent a 7.9 percent increase in spending compared to February 2012. Private construction of non-residential units rose 0.4 percent for the month and public construction grew 0.9 percent despite persistent government budget problems.

The way forward for housing

Economists universally project increases in construction spending and housing starts in 2013 as the housing crisis finally ends and most of the nation’s healing process begins. Although this month’s news is primarily positive, analysts note that spending is still far below healthy levels and has a long way to go before returning to it’s pre-recession normal.

Meanwhile, home values in March experienced their second largest gain since 2006, according to Zillow.

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“Rising home values will free many more homeowners from negative equity, allowing some of them to list their homes for sale which, in turn, will ease supply constraints,” said Zillow’s Chief Economist, Dr. Stan Humphries. “Burgeoning new construction will also help bring more supply into the marketplace. As more supply comes on line, home value appreciation rates will moderate and stabilize, marking the final transition from a recovering market to a healthy and sustainable market.”

Regardless of buyer and seller behavior, however, politics plays a key role in exactly how quickly housing recovers. Right now, there is a heated battle on The Hill with the Federal Housing Finance Agency again being called to resign for his refusal to forgive debts, so his position as the literal head of the housing market, even above Obama, will dictate which path the housing recovery will take.

Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

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