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Posted 09/24/2016

Builders Can’t Build Homes Fast Enough

Census Bureau Single Family Housing Starts August 2016

Builders Trying To Keep Pace With Housing Demand

Single-family housing starts were down in August, with builders facing headwinds.

Buildable lots and skilled workers are in short supply; builders are trying to stay ahead of unrelenting buyer demand.

As compared to last year, starts are down 1 percent on a seasonally-adjusted, annualized basis, to 722,000 units nationwide.

Housing permits showed a sizable jump, up nearly 4 percent from a month ago. Builders are optimistic about the future, and are preparing for a banner year in 2017.

A "started" home is one on which ground has been broken.

Housing starts have been fueled by rising rents, cheap mortgage rates, and an abundance of low- and no-downpayment mortgages.

The¬†80/10/10 piggyback loan¬†has been in high demand of late,¬†and buyers are finding the¬†Fannie Mae HomeReady‚ĄĘ¬†home loan to be a worthwhile alternative to FHA lending.

The math for "Should I rent or should I buy?" has shifted and builders are scrambling to respond.

It's an excellent time to shop for a home.

Click to see today's rates (Sep 29th, 2016)

Eye On The Market? Look At "Single-Family" Housing Starts

Each month, the U.S. Census Bureau and HUD co-publish the Housing Starts report.

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

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

Structures with five or more units are more commonly known as "apartment buildings". Apartment buildings 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.

The government reports that Single-Family Housing Starts fell 1.2% last month from the year-ago period, and that apartment starts rose two percent.

Changes in apartment building construction, however, are of little importance to buyers like you and me.

This is because apartments are typically built by, and owned by, developers to use for rental housing. The majority of U.S. buyers don't operate in this market. Everyday buyers don't build or purchase entire apartment buildings -- we live in single-family homes.

Tracking single-family housing starts, then, can be a better way to gauge U.S. new construction.

Single-family starts were lower in August, with mixed results by region. Permits to build new homes, however, were up 4% nationwide compared to one month prior.

If builders could possibly build more, it seems, they would.

Click to see today's rates (Sep 29th, 2016)

Housing Starts Up 30% In The West

Nationwide, year-over-year housing starts are down slightly in August. That conclusion, however, is derived by examining a "mixed bag" of regions.

Starts are up -- way up -- in some sections of the country.

The West Region, which contains some of the hottest markets -- Arizona, California, Oregon, Washington, and more -- saw a near-30% rise in starts compared to one year ago.

That confirms a report the National Association of Home Builders released in September, stating that home builders in the West reported a confidence "score" of 82 out of 100 -- a decade-best reading. For comparison, home builder sentiment was clocked at 65 nationwide, which outdid the 12-month average of about 60.

There appears to be no slow down in the real estate market.

That begs the question: if starts are high in the West, and home builder confidence is up, why are nationwide starts down for the month?

The answer rests within data from the South Region.

The region, which includes Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West Virginia, Alabama, Kentucky, Mississippi, Tennessee, Arkansas, Louisiana, Oklahoma, and Texas accounted for over 50% of last month's U.S. single-family housing starts.

Starts were down 13% from one month ago there, but not due to lower buyer demand.

More than two feet of rain fell in some areas of the south in August. This forced home builders to delay groundbreaking on new homes.

Lower activity in the South Region, then, pull down the national average, due to its massive influence on the overall reading.

Builders were not deterred because of the temporary setback. Permitting was up four percent in the region month-over-month. Housing starts should rebound nicely in September.

Here's the takeaway: home buyers in all regions should consider starting their home search in earnest. Demand for homes is outstripping supply. Builders can't keep up.

That could mean higher prices in 2017, plus fewer free upgrades from builders, and more competition from local buyers.

The best deals in real estate could be the ones available right now.

Click to see today's rates (Sep 29th, 2016)

Mortgage Loans For New Homes

The 2015 housing market was a good one. 2016 is proving to be even better.

Mortgage rates started the year in a downward spiral, and are holding a recent lows. Furthermore, nationwide, unadjusted home values have surpassed last decade's peak.

With today's prices, low mortgage rates boost buying power, and are becoming all-but-required for continued affordability.

If you've been in the market for a home, no doubt you've noticed. It's a competitive market and putting your best foot forward is essential if you want to "get the house".

The good news is that mortgage approvals are getting simpler.

In addition to reducing their loan approval standards, mortgage lenders have recently lowered minimum credit score requirements, made concessions for self-employed income, and granted leniency on loans which "make sense".

Furthermore, there are more low- and no-down payment loans available than during any period this decade.

In addition to the¬†Conventional 97 program and HomeReady‚ĄĘ programs, which are backed by Fannie Mae and require just 3% down, demand for the FHA 96.5% LTV program is high, as are requests for "piggyback loans".

There are also the VA and USDA loan programs -- both of which allow 100% financing.

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. They are optionally no money down and require no mortgage insurance.

USDA loans are also no money down, backed by the U.S. Department of Agriculture. USDA loans 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 set to drop further in late 2016. The Rural Development Loan, as it is also known, will become one of the best values -- and best kept secrets -- in the mortgage market.

With home prices expected to rise through the end of 2016, the availability of low- and no-downpayment mortgages will be a boon to U.S. buyers -- especially if current mortgage rates remain low.

What Are Today's Mortgage Rates?

The housing market appears to be growing and mortgage rates remain cheap. If you're planning to buy new construction, the best opportunities may be the ones you find now.

Get today's live mortgage rates now. Your social security number is not required to get started, and all quotes come with access to your live mortgage credit scores.

Click to see today's rates (Sep 29th, 2016)

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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2016 Conforming, FHA, & VA Loan Limits

Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)