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To keep track of the real estate and mortgage markets FREEandCLEAR monitors a lot of statistics including Mortgage Applications, the Housing Market Index, Existing and New Home Sales and Housing Prices. Another key report that reflects the strength of the housing market is the monthly Housing Starts report released jointly by the U.S. Census Bureau, U.S. Department of Commerce and U.S. Department of Housing & Urban Development. The Housing Starts report includes two pieces of data: starts and permits. A housing start is counted when construction begins on a new single or multifamily property. A permit is counted when a permit is issued by a local government to a property owner or builder to begin construction on a new single or multifamily property. Because construction typically begins soon after a new permit is issued, housing starts and permits are typically highly correlated.
The Housing Starts report is issued on a monthly basis and provides figures for the prior month. For example, the report for September includes housing starts and permit statistics for August. The report for September showed that housing starts declined 14.4% in August to approximately 956,000 units while permits declined 5.6% to 998,000. Both starts and permits came in below analyst expectations for August. The decline in starts was driven by a significant drop-off in the multifamily segment while single family starts showed a more modest decline of 2.4%. The single family segment is larger than the multifamily segment. It is important to note that the Housing Starts report tends to fluctuate significantly from month to month so it is better to look at the trends over the course of five-to-six months. For example, July housing starts were up 15.7% on a monthly basis and permits were up 8.1% so the decline in the August figures was not surprising although the magnitude of the decline was. (Source: Bloomberg)
What it Means for Mortgage Borrowers
As mentioned above, it is hard to draw too many conclusions by looking at the Housing Starts report for any single month but the August report suggests that new housing construction could come in slightly below expectations over the next several months. Fewer new homes means less housing supply for prospective home buyers which in turn can have an impact on home prices. Additionally, multifamily starts and permits continue to show more strength than the single family segment which means home buyers may have more multifamily options such as condominiums or duplexes. We will track future Housing Starts reports, as well as the other housing and mortgage statistics we follow, so stay tuned to the FREEandCLEAR Blog to see if the August figures are outliers or part of a broader trend. And use our Mortgage Qualification Calculator, which allows you to include homeowners association (HOA) fees, which are common with multifamily properties, to determine what size mortgage you can afford.
The FREEandCLEAR Mortgage Expert