The new construction housing market continues to make gains. It’s good news for the nation’s builders and our national economy, but for today’s home buyers, news of an improving housing market can be a little bit less-than-welcome.
As housing markets gain and home prices rise, buyers are at-risk of being “priced out” of homeownership.
Single-Family Housing Starts Moves To 2-Year High
A “housing start” is a home on which ground has broken and, Wednesday, the Census Bureau reported that Single-Family Housing Starts rose 5.5 percent In August to a seasonally-adjusted, annualized 535,000 units.
The report marks the fifth time in the last six months during which housing starts have increased and raises the single-family starts tally to its highest level since April 2010 — the last month that year’s federal homebuyer tax credit.
The August 2012 single-family housing starts were 27 percent higher as compared to the year prior.
Rise In Permits Suggest 2013 Expansion
In addition to housing starts, single-family building permits climbed in August as well, rising to 512,000 units on a seasonally-adjusted, annualized basis. This, too, is a multi-year high and hints at continued housing market strength.
The nation’s home builders appear to agree.
Earlier this week, the National Association of Homebuilders (NAHB) released its Housing Market Index which showed homebuilder confidence at a 6-year high. Builders are reporting higher sales volume than in recent years; expect higher sales volume for the coming 6 months; and are witnessing a surge in buyer foot traffic.
Furthermore, low mortgage rates have changed the Rent vs Buy decision in many U.S. markets, adding to the pool of potential home buyers nationwide.
In July, there were 142,000 new homes for sale nationwide and at the current pace of sales, the entire stock would be sold in 4.6 months. Supplies less than a 6.0-months are considered bullish for housing.
Low Downpayment Mortgages For New Construction
Like most of the U.S. housing market, growth in new construction has been fueled by a combination of low mortgage rates and broad access to low- and no-downpayment mortgages.
The 30-year fixed rate mortgage has averaged under 4.000 for all of 2012 and FHA, VA, and USDA mortgages remain widely available.
- The FHA mortgage requires a 3.5% downpayment and is available to everyone
- The VA mortgage requires no downpayment and is available to military borrowers
- The USDA mortgage requires no downpayment and is available in many U.S. markets
However, it may be the dearth of foreclosures for sale that’s ultimately pushing the new construction market forward.
Dating back 22 months, the number of bank repossessions has tapered month-by-month such that by August 2012, there was a 19% drop in bank repossessions as compared to a year ago. With fewer foreclosures for sale, the new construction market benefits.