Builder Optimism Turns Into New Home Construction
Low mortgage rates and high buyer demand are keeping single-family housing starts in the stratosphere.
In all of 2016 — a banner year for housing — an average of “just” 784,000 homes were started each month on a seasonally-adjusted, annualized basis.
In January, construction started on an impressive rate of 823,000 single-family homes annually.
If this pace keeps up, it would be the best year for new construction since 2007.
Builders are optimistic about the future. A recent report shows home builders are seeing high buyer demand and great prospects for the coming year.
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.
FHA loans are gaining in popularity, as are other government-backed loans like the USDA home loan and VA.
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.Verify your new rate (Aug 10th, 2020)
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 into three categories, by property type.
- 1-Unit: Single-family homes, including row homes and townhomes
- 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 4% last month from the year-ago period, and that apartment starts fell seventeen 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 six percent higher year-over-year in January, with three of four regions reporting higher activity. Permits to build new homes were up, with a 1.4 percent increase nationwide compared to one month prior.
At a pace of over 800,000 homes annually, builders are trying to keep up with strong demand.Verify your new rate (Aug 10th, 2020)
South Region Leads Nation In Housing Starts Growth
Nationwide, year-over-year housing starts are up more than six percent. That figure is derived from a “mixed bag” of regions.
The 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.
This region also happened to lead the nation in housing starts growth. It posted near a ten percent gain in new single-family construction, while others fared almost as well.
- Northeast Region: +8.6% from one month ago
- Midwest Region: +6.3% from one month ago
- South Region: +9.6% from one month ago
- West Region: -18.6% from one month ago
Builder optimism is high in every region, as revealed by a report from the National Association of Home Builders (NAHB).
The February release of the NAHB Housing Market Index stated that home builders are “confident” in the housing market over the next six to twelve months. Builders reported a confidence score of 65 out of 100, one of the highest readings since 2005.
The upbeat outlook is showing itself in this month’s housing starts, as builders take action.
It seems the biggest concern for builders at the moment is finding buildable lots, and hiring workers to construct homes. 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.Verify your new rate (Aug 10th, 2020)
Mortgage Loans For New Homes
The 2016 housing market was a good one. 2017 could prove even better.
Mortgage rates started the year in a downward spiral, then ticked up in November. But, rising rates could make home buying easier in 2017: mortgage lenders will be less busy with refinance business, and eager for home purchases.
As is stands, homes to buy are getting harder to find.
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™ 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 low. 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.Verify your new rate (Aug 10th, 2020)