5 Top Construction Picks As Housing Starts Hit 9-Year High
Zacks Investment Research | Nov 18, 2016 07:50AM ET
Housing starts touched a nine-year high in October as builders ramped up construction of both single and multi-family homes. Steady increase in hiring and healthier finances have made home purchases affordable, which eventually boosted construction. Rise in income levels is also likely to drive demand among buyers, in spite of an uptick in borrowing costs.
President-elect Donald Trump’s emphasis to boost infrastructural spending is further expected to spark sharp gains among the top publicly-traded construction companies. Banking on this optimism, it will be prudent to invest in companies positioned to profit in the near term.
Residential Starts Scale a 9-Year High
New home construction climbed 25.5% to a seasonally adjusted rate of 1.323 million in October from the prior month, according to the Commerce Department. This was stronger than the seasonally adjusted 1.161 million forecasted by the consensus. In fact, residential starts touched the highest level since Aug 2007, while the percentage increase from September was the biggest since Jul 1982.
A strong upside in single family housing helped new home construction gain traction in October. The uptick in starts in the month followed a sharp drop in September. Single-family home construction jumped 10.7%, reaching a rate of 869,000, the highest since Oct 2007. Work on multi-family homes, such as townhouses, condominiums and apartment buildings, also posted a dramatic rebound, clocking a staggering 68.8% gain to hit a rate of 454,000 in October. Starts for buildings with five units or more touched their highest level since Jun 2015.
New construction accelerated in all regions of the country, with starts soaring more than 44% in both Northeast and Midwest regions. Permits for new construction, in the meantime, edged up 0.3% to an annual rate of 1.23 million. This shows that builders will continue to ramp up construction to meet the escalated demand for new homes and apartments.
What’s Behind the Reasonable Pricing?
A tightening labor market driven by rise in income levels made new homes reasonablefor many Americans who had restrained from purchasing in the wake of the Great Recession. The U.S. Department of Labor said that the average hourly earnings increased by 10 cents or 0.4% to $25.92 in October, which was preceded by an increase of 8 cents in September.
Wage growth increased 2.8% year on year, the highest since Jul 2009. The unemployment rate, meantime, declined 0.1 percentage point last month to 4.9% (read more: Original post
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