The new construction housing market continues to improve.
One day after the National Association of Homebuilders reported a 5-year high in homebuilder confidence, the U.S. Census Bureau reports that single-family housing starts rose 2 percent for the second straight month last month.
In April, on a seasonally-adjusted, annualized basis, the government reports 492,000 single-family housing starts. A “housing start” is a home on which ground has broken.
In addition, March’s single-family housing starts were revised higher. What was previously reported as a three percent loss was re-measured and changed to a 0.2% gain.
The April tally marks a six percent increase over the one-year moving average and, along with the March revision, suggests that the springtime housing market may have just been seasonal.
In March, a number of reports suggested a housing retreat :
Since then, though, low mortgage rates and affordable home prices appear to have sustained the new construction market, which now appears poised for a strong 2012.
As one mark of proof, active buyers of newly-built homes in Carlsbad and nationwide are scheduling “model home” showings at the fastest pace since 2007. The burst of foot traffic high has builders upping their sales expectations for the next 6 months.
A scenario like this would normally lead new home prices higher, but the pressure for prices to rise may be offset by the amount of new home supply coming online.
In addition to a rise in Housing Starts, the Census Bureau also reports that, in April, the number of Building Permits for single-family homes rose 2 percent to move to its second-highest level since March 2010 — the month preceding the end of the 2010 federal Home buyer tax credit.
86 percent of homes break ground within one month of permit issuance.
It’s unclear whether housing is on a steady path higher, but there’s a growing body of evidence that suggests the market bottom has already passed.
Tuesday, the government released its March 2012 New Residential Construction report.
The report is made up of three sections, each related to a phase of the “new home” market. The report’s first part is Building Permits; the second is Housing Starts; the third is Housing Completions.
Of the three sections, it’s Housing Starts that gets the most attention from the press — mostly because, of the triad, it’s the simplest for a layperson to understand. However, the manner in which Housing Starts data is reported can be misleading.
Today’s newspapers offer up an excellent example.
According to the Census Bureau, total Housing Starts fell by 6% in March as compared to the month prior. 654,000 units were started on a seasonally-adjusted annualized basis.
For Housing Starts, it’s the lowest reading in 5 months, a statistic suggesting that the housing market may have lost some momentum. Much of the press covered the story from a “housing is slowing” angle.
A few published headlines include :
- U.S. Housing Starts Unexpectedly Drop To 5-Month Low (BusinessWeek)
- New Home Constructions Takes Pause (CNNMoney)
- A Delayed Winter For Housing (US World And News)
Although these headlines are accurate, they tell just half of the story.
Housing Starts did drop in March, but if we remove a subset of the data — structures with “5 or more units”; a grouping that includes condominiums and apartment buildings — we’re left with Housing Starts for single-family residences only. It’s this data that matters most to buyers in San Marcos and nationwide.
Few home buyers buy entire apartment buildings. Most buy single-family homes.
In March, single-family Housing Starts were down 0.2% from the month prior, or just 1,000 units on a seasonally-adjusted, annualized basis.
That’s hardly a drop at all.
The new construction housing market appears primed for growth this season.
According to the Census Bureau, the number of single-family building permits issued in February rose to 472,000 on a seasonally-adjusted, annual basis, marking the highest building permit tally since April 2010 — the last month of that year’s federal home buyer tax credit program.
Building permits are a pre-cursor to new home construction.
In 2011, from the date of permit-issuance to the date of “ground-breaking”, an average of 27 calendar days passed. February’s data, therefore, is a signal that the market for newly-built homes should be strong this year, an idea supported by the most recent homebuilder confidence survey.
As buyer foot traffic soars, homebuilders expect to make more sales in the next 6 months than at any time since the housing market’s collapse. Builder confidence is at a 5-year high.
Last month, however, single-family housing starts slipped.
As compared to January, February’s single-family housing starts fell by 50,000 units on a seasonally-adjusted, annualized basis. The 10% drop represents the largest one-month drop since February 2011. It’s a statistic that may suggest that this year’s results are simply seasonal.
For buyers of new construction, the news is mixed.
Rising permits and builder confidence may mean that Oceanside homebuilders will be less willing to negotiate with today’s buyer on upgrades and/or home prices. However, as more new home supply is set to come online, excess housing stock could help keep home prices low.
If you’re planning to buy new construction in California this year, be sure to ask your real estate agent about the local home supply, and how the market is currently trending. With mortgage rates low and the summer buying season approaching, you may find some of your best deals of the year available in just the next few weeks.
The new construction housing market continues to show strength across the country.
According to the U.S. Census Bureau, Single-Family Housing Starts rose to 447,000 units on a seasonally-adjusted, annualized basis in November — a 2 percent increase from October.
A “Housing Start” is defined as breaking ground on new home construction.
November’s figures mark the third straight month of Single-Family Housing Starts gains. The new construction metric is now 15 percent above its all-time low, set in February of this year.
None of this should be a surprise to new home buyers in Oceanside.
Housing data has been trending better since September with sales volumes rising and home inventories falling. Basic economics tells us that home prices should soon rise.
The good news is that low mortgage rates should keep homes affordable.
Since mid-November, the average, conventional 30-year fixed rate mortgage has hovered near 4.000% nationwide with an accompanying 0.7 discount points plus closing costs. 1 discount point equals one percent of your loan size. This is down from near 4.500% six months ago, and the drop has made a big impact on home affordability.
- June 2011 : $200,000 mortgage costs $1,013.37 per month
- December 2011 : $200,000 mortgage costs $954.83 per month
This represents $700 in savings per year. It’s no wonder home builders report the highest buyer foot traffic in 3 years.
Meanwhile, the market shows little signs of slowing down. Building Permits are on the rise, too.
Permits for single-family homes rose to their highest levels of year in November and 89 percent of those homes will start construction within 60 days. This means that Single-Family Housing Starts should stay strong through the early part of 2012, and into the spring.
If you’re planning to buy new construction in California , therefore, talk to your real estate agent soon and consider moving up your time frame. With mortgage rates low and next year’s buying season approaching, you may find that the best “deals” will come within the next few weeks only.