Here’s Why the Real Housing Recovery Is Just Getting Started

A worker uses a saw on a roof while building a new home at the Toll Brothers Inc. Baker Ranch community development in Lake Forest, California, U.S., on Tuesday, Feb. 11, 2014. Labor-market gains and rising real-estate values have developers upbeat about the industry's prospects. Homebuilder sentiment in January held near its highest level in eight years, dipping to 56 from 57 in December. Photographer: Patrick T. Fallon/Bloomberg via Getty Images

Home builders are busier than they’ve been in years.

The year of the construction boom just got even better for American homebuilders.

The Census Bureau and the Department of Housing and Urban Development announced Friday morning that builders launched new housing projects at a seasonally-adjusted annual rate of 1.17 million in June — that’s up nearly 10% from May, and 27% from June 2014. The rate is also just shy of the eight-year high of 1.19 million set in April.

The numbers were driven by a big increase in multi-family construction, as housing starts of single-family homes actually shrank by 0.9% in June. As you can see in the chart below from Calculated Risk, the housing construction recovery has been dominated by the construction of apartment buildings, reflecting a shift in demand for urban over suburban housing, and the fact that the recession has made it difficult for many Americans to qualify for mortgages to buy a home.

But even if many Americans aren’t able to buy homes, they still need somewhere to live. In the years following the real estate bubble, data suggested that Americans were increasingly doubling up, and living with friends and family rather than starting households of their own. Now that trend appears to be shifting, with more recent data showing stronger household formation that at any time since the housing crisis.

Although more data will be necessary before we can declare the housing construction slump officially over, 2015 is shaping up to be a great year for builders.

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