A record plunge in the South pushed down new home construction in the U.S. last month. Housing starts in June fell 9.3% to an 893,000 annualized rate. Commerce Department figures indicate that is the lowest in nine months. Building permits fell as well.
“Single family home construction is still way below normal levels but there’s been a boom in apartment construction.” says Jed Kolko, the chief economist at the real estate website Trulia. But in the case of the latest report, both metrics plunged last month.
The figures bear out Federal Reserve Chair Janet Yellen’s view that progress in the housing market has been “disappointing” this year, as she told Congress this week during her semi-annual testimony.
Prices are up as well, hurting people’s chances of purchasing an affordable home. The median selling price of a new home sold in May increased 6.9% from a year ago.
Despite that, Kolko says he is seeing a rise in homeownership among millennials. According to data Trulia has been tracking, the share of 18-34 year-olds who became homeowners rose 0.9% in 2013. That’s in contrast to the latest Census Bureau data that shows ownership is still falling for young adults, down 0.1% year over year.
But Trulia’s data saw an uptick in home ownership last year for millennials. Demographic shifts account for the change. The rate of young adults who head their own household rose in 2013, back to the highest level since 2010. Kolko says more and more young people are starting to move out of their parents’ homes as they go on to rent and buy.
He is more concerned that middle-aged folks are not getting into the market. He says he sees a drop in homeownership among 35-44 year olds as “they really bore the brunt of the foreclosure crisis; they were the folks buying homes at the beginning and middle of the bubble, and they’re also the [group] of people who lost homes during the crisis.” Kolko concludes that to get the housing recovery really back on track- you need the missing homeowners - the middle-aged buyers.
Milanee Kapadia is a freelance contributor to Yahoo Finance. Follow her on Twitter @MilaneeKapadia.
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