Posted December 19, 2013Tweet
Another month, another big surge for U.S. housing.
On a seasonally-adjusted, annualized basis, single-family housing starts reached to a 7-year record last month as the new construction housing market continues to outperform the market for home resales.
It's no surprise, then, that homebuilder confidence has soared, jumping 4 points in December to reach levels unequaled since last decade. For buyers of new homes, the results foreshadow higher home prices into 2014 market may find it harder to get "great deals".
A "housing start" is a home on which construction has recently started; a milestone often marked by a "ground break".
In November, Housing Starts for single-family homes rose to 727,000 units on a seasonally-adjusted, annualized basis -- a 21 percent increase from the monthly prior.
It's another signal that the new construction housing market will be a strong one in 2014. Home inventories remain low, the speed of sales remains brisk, and buyer foot traffic is near its highest point in seven years.
Last month, builder broke ground on the most homes since March 2008.
This a notable date. March 2008 not only precedes the financial market turmoil which led to the collapse of Lehman Brothers; the sale of Merrill Lynch to Bank of America; and the nationalization of Fannie Mae and Freddie Mac to the FHFA, but it was also less than one year into last decade's housing market's downturn.
Home values were dropping at the time, but not quickly enough to cause concern among the public. Yet, among homebuilders, worry was palpable. Homebuilder confidence had already plunged two-thirds from its peak as builders got prepped for a downturn.
Today, the market is the opposite.
Housing starts are up and so is builder confidence. Starts have reached pre-recession levels and builder confidence has, too. These moves have repercussions for the 2014 housing market.
As builder confidence increases, new construction buyers are less likely to gain price concessions at the time of contract. Free upgrade packages are less likely, too. The best deals in new construction may be the ones you find today.
The average new home sale price is already up 13% in the last twelve months.
There is a scarcity of new homes for sale. Builders may prefer it that way. Short supply and strong demand results in higher prices, and that's exactly what new construction buyers are seeing.
At the end of October, the national supply of new homes stood at 4.9 months. This means that, at the current sales pace, the entire stock of homes would be "sold out" in fewer than five months.
Analysts believe the supply of less than 6.0 months signifies a seller's market; one in which the seller has negotiation leverage over the buyer. It's a situation which won't change soon.
Low mortgage rates and the abundance of low- and no-downpayment mortgage programs have helped first-time and repeat buyers remain active in the market. The 30-year fixed rate loan remains at roughly half its historical average; and adjustable-rate mortgages have proved to be inexpensive and savvy.
Among the more popular low-downpayment programs is the FHA 96.5% mortgage, which offers additional benefits beyond a low downpayment. FHA loans allow lower credit scores to qualify; offer looser underwriting standards; and permit a homeowners to transfer a home's mortgage to a future homebuyer via the Assumable Mortgage clause.
Furthermore, via its Back to Work program, the FHA will approve a mortgage just one year after short sale, foreclosure, or bankruptcy.
Another common program has been the VA mortgage.
For eligible military borrowers, the VA loan allow for 100% financing and requires no mortgage insurance. VA mortgage rates are often low as compared to FHA rates, and borrowers get access to the VA Streamline Refinance -- one of the simplest and fastest refinance programs available.
Also popular is the USDA Rural Housing Loan. Available in many suburban neighborhoods, the USDA program allow 100% financing and very low rates.
With mortgage rates still all-time lows, it's a terrific time to evaluate your budget for housing and to see how much home you can afford. Mortgage rates are expected to rise in 2014 and so are home prices. Your purchasing power for homes will likely decrease with time.
See today's mortgage rates and get optionally pre-approved. There's no cost and no obligation, and rates are customized to meet your goal.
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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2014 Conforming & FHA Loan Limits
Mortgage loan limits for every U.S. county,
as published by Fannie Mae & Freddie Mac, and the FHA.