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Posted September 19, 2013
in Real Estate Sales

U.S. Housing Starts Handily Beat Wall Street Expectations; Defy “Rising Mortgage Rates” Theory

Housing Starts remain strong through August 2013. Homebuilder confidence at 7-year high.

Housing Starts remain strong through August 2013. Homebuilder confidence at 7-year high.

New construction housing remains in high-demand.

Single-Family Housing Starts climbed to a 6-month high last month, reaching 628,000 units on a seasonally-adjusted, annualized basis. It's no wonder U.S. homebuilders have confidence in next year's home sales.

Demand is rising for newly-built homes. New home prices will likely rise, too.

See today's new home mortgage rates here.

Housing Starts Lag Demand

Each month, the Department of Housing and Urban Development (HUD), in conjunction with the U.S. Department of Commerce, releases its New Residential Construction report. The report is comprised of three parts -- Building Permits, Housing Starts, and Housing Completions.

Data from the August 2013 was unexpectedly strong. Higher mortgage rates were supposed to have slowed summer the housing figures. In time, they might. For now, though, the numbers look strong.

For single-family homes, Building Permits and Housing Starts both rose in August as compared to the month prior.

  • Building Permits : +3 percent from July 2013
  • Housing Starts : +7 percent from July 2013

Data was equally strong on an annual basis. As compared to the August prior, Building Permits and Housing Starts for single-family homes rose 21% and 16%, respectively. Both readings are similar to what the new housing market experienced in 2008, when the market was just removed from its peak.

It's no wonder homebuilder confidence is high.

Recently, the National Association of Homebuilders reported homebuilder confidence at a level of 58, which is considered "good". It's the highest reading since late-2005 and one which is buoyed by huge amounts of traffic coming through model units.

Foot traffic has not been this strong in 7 years, say homebuilders. Home sales over the next 6 months are expected to be similarly strong.

See today's new home mortgage rates here.

Affordable Payments For New Construction Homes

Low mortgage rates have been a factor in this year's surge for new homes. Rates for buyers willing to pay discount points are steadfastly in the four percent range, and a bevy of low- and no-downpayment mortgages have helped home buyers who have little cash available for downpayment.

One such program is the Fannie Mae Conventional 97 program.

Via the Conventional 97, home buyers can buy a home with as little as 3 percent downpayment and can avoid the upfront mortgage insurance costs which accompany an FHA loan. Conventional 97 mortgages allow cash downpayment gifts and are well-suited for buyers with strong credit.

For buyers with less-than-perfect credit, the FHA mortgage is an excellent alternative. FHA mortgages require a 3.5% downpayment and approval terms are often more flexible than with a Fannie Mae or Freddie Mac loan.

As a bonus, FHA loans are assumable which means that homes with FHA loans on them can be sold with your FHA mortgage rate attached.

Other low-downpayment options include the VA mortgage, which allows for 100% financing for eligible military borrowers; and the 100% USDA Rural Housing Loan which is somewhat misnamed. 

100% USDA Rural Housing Loans aren't just for farms. USDA loans are available in many suburban census tracts nationwide, including those which border major U.S. cities.

Confirm your USDA eligibility with a mortgage rate check.

Want To Buy New Construction? Start Here.

If your plans for 2013 or 2014 include buying a newly-built home, take a look at today's mortgage rates to see for how much home you'll qualify. Mortgage rates remain low, but home prices may not.

Consider getting ahead of next year's demand. Mortgage rates are free, and there's no obligation whatsoever.

See today's new home mortgage rates here.

The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.

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