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Record Starts in 2004

How did your building business do last year? The market for all new home construction in the United States hit an all-time high in 2004, reaching a stunning total of 1.953 million housing starts. This is a 5.7% increase from the 1.848 million starts in 2003.

On the single-family side, U.S. home builders started 1.6 million homes. This is a 7.3% increase over the 1.5 million single-family homes built in 2003.

For the year, starts were up 9.2% in the West, 8.3% in the South and 6.6% in the Northeast; starts declined 4.8% in the Midwest.

“The nations home builders continue to move forward to meet the strong housing demand that has characterized the marketplace for some time, and we are confident that 2005 will be another excellent year for housing,” says NAHB President David Wilson, a custom home builder from Ketchum, ID.

Wilson notes that the industry was helped last year by persistently low mortgage interest rates, but that ongoing gains this year in jobs and household income should help offset the slow but steady rise in mortgage interest rates anticipated as a result of Federal Reserve policy. “We are geared up for another big housing year,” Wilson says, “although we don’t expect to be building at quite the break-neck pace of 2004.”

For the month of December, housing starts climbed 10.9% to a seasonally adjusted annual rate of 2.004 million, according to the Commerce Department’s monthly report on residential construction. Furthermore, the backlog of unused permits rose in December, providing forward momentum for housing production starting off the new year.

Multifamily housing starts were up 0.6% in December, at a seasonally adjusted annual rate of 326,000; they were down a scant 1% for the year, slipping to 345,000 units from 349,000 units in 2003.

“Home building in December was absolutely solid, finishing up the year nicely after some softening in November that was related to bad weather,” says David Seiders, chief economist of NAHB. “The level of unused building permits moved up last month, and that is a favorable sign for starts activity as we move forward this year.” He says builders polled in this month’s NAHB/Wells Fargo Housing Market Index (HMI) expressed a high degree of optimism about housing market conditions currently and over the next six months.

Seiders sees a modest decline of 3% to 4% in new home construction this year as the result of higher mortgage rates, which re projected to average about 6.3% on fixed-rate loans, up from 5.8% last year.

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