Housing Starts Show Mixed Results
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 November 2014 showed that housing starts declined while permits increased in October after both figures rebounded in September. The housing starts figures tend to fluctuate on a monthly basis so although the October figures came in slightly below analyst expectations the results were not totally unexpected. The report showed that housing starts declined 2.8% in October to approximately 1,009,00 units while permits grew for the second consecutive month, increasing 4.8% to 1,008,000. The decrease in housing starts was driven by a 15.4% decline in the multifamily segment while single family housing starts showed an increase of 4.2% for the second month in a row. Multifamily permits increased 10.0% in October while single family permits rose by a more modest 1.4%. The single family segment is larger than the multifamily segment. The Housing Starts report continues to fluctuate on a monthly basis as the October figures compare to a 6.3% increase in starts and a 1.5% increase in permits in September. (Source: Bloomberg)
What it Means for Mortgage Borrowers
Housing starts continue to fluctuate from month to month but positive figures for both single family housing starts and permits could mean that home buyers have more single family new home inventory available in the future. Additional housing supply helps to alleviate pricing pressure and could mean that there are more affordable options for home buyers, at least in the new home market. If you are thinking about buying a home, use the FREEandCLEAR Mortgage Selector to determine the mortgage size and program that are right for you. Prospective home buyers can also use the INTEREST RATES feature on FREEandCLEAR to review interest rates and fees for lenders in their area.
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