A 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 issued in April 2015 showed lackluster results for March 2015 after a relatively sluggish report for February. After declining 15.3% in February due to weather-related challenges, housing starts increased a meager 2.0% to approximately 926,000 annualized units. The housing starts figure came in below expectations from industry analysts who were hoping for a rebound following the disappointing February report. Housing starts gains in the Northeast and Midwest were overshadowed by declines in the West and the South, the largest U.S. housing market. Housing permits also disappointed, declining 5.7% in March to 1.039 million annualized units, as compared to a 4.0% increase in February. The permit figure also fell below analyst expectations. In a disappointing sign for the housing market, low interest rates and improved weather failed to lift the Housing Starts report. This contrasts with other recent market indicators such as the housing market index, new homes sales report and mortgage application index which all showed positive momentum for the mortgage and real estate markets. (Source: Bloomberg)
What it Means for Mortgage Borrowers
As noted above, the Housing Starts report is somewhat of an outlier as compared to more positive recent reports for other mortgage market indicators. If the Housing Starts report continues to lag, this could result in lower housing supply for potential home buyers. It is too earlier to jump to conclusions and other market reports suggest that buyers are able to find attractively priced homes and arrange mortgage financing. Interest rates remain low and nationwide home prices remain relatively steady meaning that now continues to be a good time to get a mortgage and buy a home. Use the Mortgage Selector Calculator on FREEandCLEAR to determine the what size mortgage you can afford and the mortgage program that is right for you. You can also use our INTEREST RATES function to compare rates and fees for lenders in your area to find the mortgage that is right for you.
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