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Housing Starts Remain Robust

Housing Starts Remain Robust

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru

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 on a monthly basis, includes statistics for the prior month.

The housing starts report for June builds upon the record-setting report for May to show continued strength in the new home market. In a strong sign for future new housing supply, May housing permits jumped 11.8% to 1.275 million annualized units, following a 10.1% increase in April.  The permit figure exceeded the high end of analyst expectations by a whopping 75,000 units and reached its highest level since 2007, before the real estate market collapse.  The report showed strength across all geographies, led by the the Northeast and Midwest.

In contrast to the housing permits figure, housing starts dropped 11.1% to 1.036 million annualized units in May but that is in comparison to a record-breaking April figure in which starts sky-rocketed a revised 22.1%.  The housing starts figure fell below almost impossible to meet expectations created by the huge April figure.  The report showed starts declined across all geographies, led by the the Northeast.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

The surge in housing permits for May is consistent with the strong housing market index report for June with both showing building momentum in the new home market.  Although starts declined on the month, the growth in permits reflects rising home builder confidence as well as anticipated demand for new homes from prospective buyers.  More housing supply means that home seekers will have more options which should also help to offset pressure on house prices.  It takes several months for new permits to translate into new homes on the market so now is a good time for buyers to prepare for the mortgage and home buying processes.  Prospective buyers should use our Mortgage Qualification Calculator to determine what size mortgage they can afford and review our interactive Mortgage Process Guide to master the mortgage process from start to finish.  Buyers should also use our INTEREST RATES feature on FREEandCLEAR to compare mortgage rates and fees for lenders in their area and contact lenders to get pre-approved for their mortgage in advance of the home search process.

The FREEandCLEAR Mortgage Expert

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About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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