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Posted 10/21/2016

Report: Mortgage Rates, Low-Downpayment Loans Boost Housing Starts

Census Bureau Housing Starts September 2016

Housing Starts Shoot Higher In September

Low mortgage rates and buyer demand are driving up single-family housing starts.

Starts were way up in September, rising eight percent from the month prior.

As compared to last year, construction began on five percent more homes, on a seasonally-adjusted, annualized basis, to 783,000 units nationwide.

Housing permits are up, too. Builders are optimistic about the future, and are preparing for a banner year in 2017. Permits typically precede the start of construction by 60 days.

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.

USDA home loans are gaining in popularity; its mortgage insurance just dropped, making these zero-down loans even more affordable.

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 (Oct 23rd, 2016)

Single-Family Housing Starts Matter The Most

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 rose 5% last month from the year-ago period, and that apartment starts fell forty-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 higher in September, with mixed results by region. Permits to build new homes were up, though not as much, with a one-half percent increase nationwide compared to one month prior.

At a pace of nearly 800,000 homes annually, builders are trying to keep up with strong demand.

Click to see today's rates (Oct 23rd, 2016)

South, West Regions Drive Nation's Construction Activity

Nationwide, year-over-year housing starts are up more than five percent. That figure is derived from a "mixed bag" of regions.

The final results of any given report are mainly driven by the South and West Regions, which make up nearly 80% of the new home building activity in the country.

The South Region is the most massive, including Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West Virginia, Alabama, Kentucky, Mississippi, Tennessee, Arkansas, Louisiana, Oklahoma, and Texas.

Any changes in building activity in this region will be felt nationwide.

Case in point: September's housing starts data.

South Region housing starts rose 12% month-over-month, which masked a small dip in the West.

The West is not doing poorly by any means, however. This region includes some of the hottest markets in the country -- Arizona, California, Oregon, and Washington, among others.

Builder optimism continually outperforms in this region.

A report the National Association of Home Builders released in October stated that home builders in the West reported a confidence "score" of 74 out of 100 -- one of the best readings in a decade. For comparison, home builder sentiment was clocked at 63 nationwide.

Going back to the bellweather of this report, the South, starts erased last month's losses.

In August, new home groundbreaking was down 13% from the month before in the region. It was not due to low buyer demand, but heavy rainstorms that hit the region that month.

It was a temporary setback. Builders are now making up for lost productivity.

The biggest concern for builders at the moment is finding buildable lots, and hiring workers to construct homes. It seems, if home builders could build more, they would.

Production is not meeting demand. That could mean higher prices in 2017, plus fewer free upgrades from builders, and more competition from other buyers.

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

Click to see today's rates (Oct 23rd, 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. Also known as Rural Development or RD loans, USDA can be used in many rural and suburban areas nationwide.

All low- and no-downpayment mortgages can be used for newly built homes, just as they can for previously owned ones.

Today's mortgage programs make new homes more affordable and accessible to first-time home buyers.

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 (Oct 23rd, 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)