The dark days of home building in metro Detroit appear to be ending as renewed hiring fuels demand for new homes, sparking a 47% rise in southeast Michigan housing starts for the first quarter. Yet building activity remains well below normal.
Construction began on 741 single-family homes. That compares to 505 in the same period of 2011, according to Housing Consultants of Clarkston.
At the peak of home-building activity in the 2000-05 period, an average of 5,000 homes were started per quarter.
Still, it was the most active January-March period in five years.
And experts say it could be the start of a more permanent trend upward for the area’s beaten-down housing market; 22,000 more people are working in Macomb, Oakland and Washtenaw counties this year than in 2011, according to U.S. Bureau of Labor Statistics data.
“That is 10,000 to 20,000 possible more homes needed this year. I hope it continues,” said Michael Stoskopf, chief executive of the Building Industry Association of Southeastern Michigan. “I think we are seeing improvement, and part of that points to the number of people who have jobs.”
A shortage of move-in ready homes for sale on the existing market has spurred some of the new home building. And the unseasonably good construction weather in March also helped boost the quarter.
Building permits in southeast Michigan rose 25% in 2011 compared with 2010, with 3,110 single-family permits issued, according to the Southeast Michigan Council of Governments. The permits indicate future construction.
Looming large is $4-a-gallon gas, which could make homes in farther-flung communities less desirable and hurt the rebound, Stoskopf said.
There is much building activity in outlying areas such as Lyon Township, he said, questioning whether people will want to increase their commute with gas prices so high.
“If the job market continues to improve, that may overcome that factor of gas prices, energy prices,” he said.
Jed Kolko, chief economist for Trulia, a national real estate site, said that the housing start increases are from a low base.
“Construction starts are still very low in Detroit and many other Midwestern cities relative to the size of the market,” he said. “Low prices and high vacancies mean less new-construction activity than in construction hot spots like Texas and the Carolinas.
“Construction still has a long way to go back to normal, and it is zigzagging rather than straight-lining. But the trend is clearly up.”
PulteGroup, the nation’s largest homebuilder, ended 2011 with a quarterly profit — its first profit in more than a year. The Bloomfield Hills-based homebuilder said it could be a sign of better things to come this year.
National data for March show that housing starts were up in the Midwest and on the East Coast, but down in the South and flat in the West.
On the whole, housing starts nationally fell 5.8% in March, while permits taken for future building were up 4.5% last month, according to Commerce Department data.
Economists expect this year nationally to top 2011 in home-building activity, but a return to normal isn’t expected until 2015, according to IHS Global Insight.