Housing Starts Jump
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 October 2014 showed that housing starts and permits rebounded in September after a significant decline in August. The report showed that housing starts increased 6.3% in September to approximately 1,017,00 units while permits increased 1.5% to 1,018,000. Housing starts exceeded analyst expectations while the permit figure came in slightly below analyst expectations. The increase in housing starts was driven by a 16.7% jump in the multifamily segment while single family starts showed a more modest increase of 1.1%. Multifamily permits increased 1.5% in September while single family permits declined by 0.5%. The single family segment is larger than the multifamily segment. The Housing Starts report continues to fluctuate on a monthly basis as the September increases compare to a 14.4% decline in starts and a 5.6% decline in permits in August. (Source: Bloomberg)
What it Means for Mortgage Borrowers
Because the Housing Starts report is so volatile, it is challenging to draw significant conclusions from any single month but the October report continues the trend of the multifamily segment out-performing the single family segment. Additionally, the relatively positive housing starts figures for October are in comparison to disappointing figures for September but the overall pace of new home construction activity continues to increase, albeit at a relatively slow rate. The relative strength of the multifamily segment as compared to the single family segment means that home buyers should have more multifamily options such as condominiums or duplexes when looking for a newly constructed home. Additionally, it will be interesting to see if the slowdown in single family housing starts pushes more home buyers into the existing home sales market, which showed weakness according to the most recent existing home sales report. Whether you are thinking about buying a new or existing home, use the FREEandCLEAR Mortgage Qualification Calculator to determine what size mortgage you can afford and check out our Mortgage Expert Insights for money and time-saving mortgage advice and tips.
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