Posted September 26, 2014

100% LTV Mortgages Help Kick-Start Housing Starts, Builder Confidence

Single-Family Housing Starts slip in August, but remain near the best levels of the year

Single-family housing starts retreated in August, but remain near highs of the year.

As compared to the month prior, starts slipped 16,000 units to 643,000 on a seasonally-adjusted annualized basis. August's reading sits above the six- and twelve-month rolling averages for the housing market metric; and, suggests ongoing strength in the new construction market.

The availability of low- and no-downpayment mortgages, plus today's mortgage rates near 145-month lows, has provided a boost to the new construction market.

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"Single-Family" Housing Starts Matter Most

Each month, the U.S. Census Bureau and HUD co-publish the Housing Starts report. A "housing start" is defined as a home on which construction has started; on which ground has broken.

Housing starts are broken in three categories, by property type.

  • 1-Unit Structures : Single-family homes such as detached residences, row homes and town homes
  • 2-4 Unit Structures : Multi-unit, residential residences with two-to-four units total
  • 5+ Unit Structure : Multi-unit, residential buildings with five or more units total

Structures with five or more units are more commonly known as "apartment buildings" and are characterized by a common basement, heating system, entrance, water supply and sewage disposal.

Each apartment unit is considered a "start". An apartment building with 150 planned units, therefore, is tallied as 150 housing starts.

In August, inclusive of all three property types, the government reports that Housing Starts fell fourteen percent from the month prior, led by a thirty-two percent decrease in apartment building construction.

Apartment units are typically built and owned by developers as rental housing.

To the individual home buyer, then, apartment building construction is of little importance. Few U.S. home buyers build and buy 2-4 unit properties, and even fewer purchase or build entire apartment buildings of 5 units or more.

To buyers like me and you. single-family housing starts are what matters most.

No matter where you live -- Loudoun County, Virginia; San Diego, California; or, Seattle, Washington, for example -- home buyers purchase single-family homes far more frequently as compared to other home property types.

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Single-Family Housing Starts Slip In August

Single-family housing starts fell 2 percent last month, dropping to 643,000 units on a seasonally-adjusted, annualized basis. It's a slight decrease as compared to July's revised figures, but four percent higher than the reading from one year ago.

The steady strength in single-family housing starts is among the reasons why homebuilder confidence is high. 

According to the National Association of Homebuilders, builder optimism has moved to a 106-month best, reaching a value of 59. Readings over 50 suggest "good" conditions for selling new homes.

Buyer foot traffic is markedly higher as compared to the winter months.

Also notable in housing starts data is that single-family starts surged in July throughout the Northeast region. This regions include New York, New Jersey, Connecticut and Massachusetts -- states in which starts had flailed earlier this year.

The majority of new construction remains concentrated in southern states, however.

The South Region, which includes Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West Virginia, Alabama, Kentucky, Mississippi, Tennessee, Arkansas, Louisiana, Oklahoma, Texas, accounted for close to half of last month's U.S. single-family housing starts.

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Mortgage Loans For New Homes

The 2014 housing market is gaining steam. Demand for homes continues to outpace supply, which is leading home values higher; and multiple-offer situations remain common nationwide.

Thankfully, mortgage guidelines are loosening.

Today's home buyers have an easier time getting approved for a mortgage as compared to several years ago. Banks are reducing approval standards, and have made it simpler to get access to low-downpayment mortgages and no-money-down loans.

For example, FHA mortgages are easier for which to qualify in 2014.

Banks have lowered minimum credit score thresholds in order to put FHA loans within reach of more U.S. buyers; and Fannie Mae and Freddie Mac continue to support their five percent downpayment mortgage programs.

VA loans and USDA loans remain popular, too -- neither requires a downpayment.

VA loans are available to eligible active-duty military personnel, veterans of the armed services, members of the national guard and reserves, and surviving spouses. VA loans offer 100% financing and require no mortgage insurance. Approval standards are flexible and mortgage rates are often lower than with comparable conventional loans.

USDA loans are also no money down.

USDA loans are backed by the U.S. Department of Agriculture and can be used in many rural and suburban areas nationwide. USDA mortgage rates are typically the lowest of all government-backed loans, and mortgage insurance rates are minuscule compared to other low-downpayment programs.

With home prices expected to rise into 2015, the availability of low- and no-downpayment mortgages will be a boon to U.S. buyers -- especially if mortgage rates remain low.

Compare Mortgage Rates Now

Mortgage rates have been on a downward trajectory since the start of 2014, improving by as much as 0.375 percentage points. Some lenders now quote rates in the 3s. Home values may be rising, but because of falling rates, U.S. homes remain affordable.

Compare today's rates and see how much home you can afford. Rates are available online at no cost and with no obligation. Plus, no social security number is required to get started.

Click here to get today's rates.

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.