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

Posted November 19, 2014

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

Housing Starts : Single-family housing starts 2007-2014

Mortgage Rates Spur Housing Growth

Single-family housing starts climbed to their highest levels of the year in October.

As compared to the month prior, starts increased 28,000 to reach 696,000 units started on a seasonally-adjusted annualized basis. October's reading sits above the six- and twelve-month rolling averages for the housing market metric firmly; and, suggests strength for the new construction market into 2015.

Housing is getting a boost from the mortgage market.

Today's availability of low- and no-downpayment mortgages for first-time and repeat buyers, plus the 17-month best for today's mortgage rates is provided a bona fide boost to the new construction market.

It's an excellent time to be shopping for a home.

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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 October, inclusive of all three property types, the government reports that Housing Starts fell three percent from the month prior, highlighted by a sixteen percent decrease in apartment building construction.

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

To individual home buyer like you and me, however, such 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 the typical U.S. homebuyer, it's single-family housing starts what matters most.

This is because no matter where you live -- Loudoun County, Virginia; San Diego, California; or, Seattle, Washington, as examples -- home buyers purchase single-family homes with far greater frequency than they purchase other home property types.

Tracking single-family housing starts can be a more effective way to gauge the health of the new construction housing market nationwide. 

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Single-Family Housing Starts Climb In October

Single-family housing starts rose 1 percent last month, reaching to 646,000 units on a seasonally-adjusted, annualized basis. The reading is an eleven percent improvement from one year ago.

Single-family housing starts have been running above the 6- and 12-month averages, which suggests that the market for newly-built homes is expanding. It's among the reasons why homebuilder confidence has been rising since the summer.

According to the National Association of Homebuilders, builder confidence currently reads 58 -- the fifth straight month confidence has topped 50 and the second-best reading of the year.

Readings over 50 are significant because when homebuilder confidence is 50 or better, it suggests "good" conditions for selling new homes.

Also notable in housing starts data is that single-family starts increased in October throughout the Northeast region. These 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 more than half of last month's U.S. single-family housing starts.

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Mortgage Loans For New Homes

The 2014 housing market will finish strong, and 2015 will begin with positive momentum. Demand for homes continues to outpace supply. This is leading home values higher; and multiple-offer situations continue to be 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, lowering minimum credit score requirements, and have made it simpler to get access to low-downpayment mortgages and no-money-down loans.

FHA mortgages are easier for which to qualify, for example.

As compared to the start of the year, improving market condition have prompted many banks to lower their minimum credit score thresholds. This has 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. Conventional loans have dropped more than one-half percentage point; and FHA and VA mortgage rates are available for even less. Lenders now quote rates in the 3s and APR is similarly low for many quoted loans.

Compare today's mortgage rates now. Rates are available online at no cost and with no obligation. 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.