Friday’s employment data suggests that there is a growing demand for new housing, particularly as potential sellers with low mortgage rates choose to stay put. According to the Bureau of Labor Statistics, job gains slowed down in July, with an addition of 187,000 jobs. However, the housing sector continued to contribute significantly to these gains, with 7,800 jobs related to residential construction being added. This marks the fourth consecutive month of growth in this combined measure.

While there was an overall increase in residential construction jobs, the rise primarily came from an increase in the number of contractors. Jobs in residential specialty trade contracting increased by 13,300. In contrast, jobs in residential building construction, which refers to those primarily responsible for the construction of buildings, fell by 5,500.

According to Jing Fu, the director of forecasting and analysis at the National Association of Home Builders, residential construction employment now stands at 3.3 million as of July. This comprises of 925,000 builders and 2.4 million residential specialty trade contractors.

Furthermore, jobs in financial services related to real estate also witnessed an increase. In July, this subsector added 4,500 jobs, which include roles related to leasing real estate, real estate agents and brokers, and other real estate-related activities.

The latest data from Redfin further highlights the economic impact of the scarcity of homes for sale. During the four-week period ending on July 30th, new listings were reported to be 21.3% lower compared to the previous year.

The rise in mortgage rates has affected both demand and supply in the housing market. However, buyers who have not been priced out of the market have turned to home builders to bridge the gap created by the limited availability of homes. According to census data, the seasonally-adjusted annual rate of contract signings for new homes in June was approximately 24% higher compared to the previous year.

New-Home Construction on the Rise during the Pandemic

The Impact of the Pandemic on the Housing Market

Despite the challenges brought about by the COVID-19 pandemic, the housing market has experienced a surge in new-home construction. According to census data, single-family housing starts, a popular indicator of new home construction, have shown a significant increase in May and have remained relatively strong in June. It is worth noting that although unadjusted single-family starts are slightly lower compared to the same period last year, builder confidence has also seen a noticeable improvement.

Builders and Investors Reap the Benefits

This imbalance in the market has been advantageous for builders and related industries, as reflected in the performance of exchange-traded funds such as the SPDR S&P Homebuilders ETF (XHB) and the iShares U.S. Home Construction ETF (ITB). These funds have achieved returns of approximately 39% and 44% year-to-date, respectively, surpassing the S&P’s 18.4% return.

Multifamily Units on the Rise

The record level of apartment construction is a significant factor contributing to this trend. Census data suggests that the seasonally-adjusted annual rate of housing units under construction in large multifamily buildings reached a record high in June. Experts predict an unprecedented influx of new multifamily units into the market. Doug Ressler, manager of business intelligence at commercial real estate analytics company Yardi Matrix, anticipates a staggering 485,000 multifamily units to hit the market this year. Furthermore, a similar number of units could become available next year, exceeding the typical range of 350,000 to 370,000 units annually.

Opportunities in Multifamily Unit Rentals

With the increased construction of multifamily units, there may be a need for additional staff to facilitate the renting process for these completed units. Joel Kan, the Mortgage Bankers Association’s deputy chief economist, suggests that despite the high number of multifamily units under construction, the rental vacancy rate remains low. This indicates a potential demand for staff to manage and lease out the available units.

In conclusion, the housing market has witnessed significant growth in new-home construction amidst the ongoing pandemic. Builders and related industries have profited from this trend, while a substantial influx of multifamily units is expected in the coming years. With the market potential in mind, there may be opportunities for increased staffing to manage the rising demand for these rental units.

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