Single-Family Housing Starts : The Market Is In Slow, Steady Recovery

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The housing market may yet be the proverbial tortoise. Month after month -- slowly and surely -- data proves what REALTORS® have known for six months. The bottom is behind us. The market is returning.

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New Construction Grows Steadily, Consistently

In the housing market -- as with other industries -- the mid-2000s were characterized by three things : (1) Over-hoping, (2) Over-hyping, and (3) Over-building. Home builders took a Fields of Dreams approach to construction. They bought land wherever possible and built, built, built.

Of course, we know how that story ended (and it wasn't with Ray Kinsella playing catch with his dad).

This time around, we have to believe that developers know better; that they learned their lesson; that out-building demand can be a bit too much risk. 

If the data is correct, it appears that they have. 

According to the Census Bureau, on a seasonally-adjusted, annualized basis, January's Single-Family Housing Starts eased 1 percent to 508,000 units nationwide, breaking a string of 4 straight months of improvement over which single-family starts climbed 22%.

A "housing start" is a new home on which construction has started.

Data like this suggests a more cautious approach from builders, even as the market gives reason for optimism. For example, although January's Housing Starts data was a slight retreat from the month prior, it still marks the second straight month that single-family housing starts surpassed a half-million units.

It's been two years since that's happened.

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Mortgage Rates Climb With The Housing Market

Since 2010, mortgage rates have been in steady decline. There are a lot of reasons why but mostly it's because, in an uncertain economy, Wall Street seeks safety of principal. To investors, stocks are "risky" and bonds are "safe". 

Meanwhile, mortgage rates are bond-based so when demand for bonds is high, rates for mortgage are low. This is why a weak economy can correlate with low mortgage rates.

Thursday, mortgage rates spiked.

When the Housing Starts data was released, its strength surprised Wall Street. Analysts know that housing is a keystone to economic recovery and it's becoming increasingly clear that, on a national level, the housing market likely bottomed in August/September 2011.

That said, the Housing Starts report should not have been a surprise at all. 

Earlier this week, the National Association of Homebuilders said homebuilder confidence was at its highest point since 2007. Builders are recording more sales, and based on soaring levels of foot traffic they're expecting 2012 to finish even stronger than it started.

Builders are building and buyers are buying.

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Buying New Construction? See Today's Mortgage Rates.

Anecdotally, the housing market is doing great. From King County, Washington, to Blacksburg, Virginia, REALTORS® report that buyers are eager, sellers are wiser, and homes sell quickly. Multiple-offer situations are more common than in 2011 and mortgage rates make homes cheap.

If your plans for 2012 call for buying new construction, consider moving up your time frame. As builder confidence rises and home supplies get scarce, you'll be less likely to find that "great deal". Today, by contrast, the market looks ripe it.

Make your budget. Get a mortgage rate, plug-in the numbers, and see what works for you. While you can.

Click here to get mortgage rates.