After a two-year contraction, the U.S. economy is expected to receive a boost from homebuilding. The housing market has been one of the hardest hit sectors of the economy during the pandemic, but recent data suggests that it is starting to recover.
According to the National Association of Home Builders (NAHB), builder confidence in the market for newly built single-family homes increased five points to 83 in September. This is the highest reading in the 35-year history of the NAHB/Wells Fargo Housing Market Index (HMI). The HMI measures builder confidence in three areas: current sales conditions, sales expectations for the next six months, and traffic of prospective buyers.
The increase in builder confidence is due to several factors. First, low mortgage rates have made it more affordable for people to buy homes. Second, there is a shortage of existing homes for sale, which has led to increased demand for new homes. Third, the pandemic has caused many people to reevaluate their living situations and consider moving to larger homes or homes in different locations.
The increase in builder confidence is also reflected in housing starts, which are a measure of new residential construction. According to the U.S. Census Bureau, housing starts increased 22.6% in July compared to June. This is the largest monthly increase since October 2016. Building permits, which are a leading indicator of future construction, also increased 18.8% in July.
The increase in homebuilding is expected to have a positive impact on the economy. Homebuilding creates jobs in construction, manufacturing, and other related industries. It also generates economic activity through the purchase of materials and services. According to the NAHB, building 1,000 single-family homes creates 2,900 full-time jobs and generates $110.96 million in taxes and fees for local, state, and federal governments.
The increase in homebuilding is also expected to have a ripple effect on the economy. When people buy new homes, they often purchase new furniture, appliances, and other household items. This creates demand for goods and services in other industries, which in turn creates more jobs and economic activity.
In conclusion, the increase in homebuilding is a positive sign for the U.S. economy. It is a reflection of increased demand for housing and low mortgage rates. It is also expected to create jobs and generate economic activity. While there are still challenges facing the housing market, such as the shortage of skilled labor and rising material costs, the increase in builder confidence and housing starts is a step in the right direction.
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