Housing Starts

Behind The Housing Starts Headlines, The Story That Matters

When it comes to housing data, sometimes you have to look past the headlines. December’s Housing Starts data offers a terrific illustration of why.

Each month, the Census Bureau tallies Housing Starts for the month prior. A “housing start” is a home on which construction has started.

The Housing Starts report is separated by property type. There is a count for single-family homes; a count for 2-4 unit homes; and a count for buildings of 5 units or more, a category including apartments and condominiums.

In December, as reported by the government, Housing Starts fell 4 percent nationwide overall. This runs contrary to recent strength in housing and the story was quickly picked up by the press:

• U.S. Housing Starts Fall More Than Forecast (BusinessWeek)
• U.S. Housing Starts Fall (MarketWatch)
• December Housing Starts Are Worse Than Expected (Fox Business)

Now, although these headlines are factually true, they’re also are a little bit misleading.

Housing Starts did fall 4 percent last month but that was for all Housing Starts, across all three property types. Data like this is somewhat irrelevant to home buyers in Northwest Indiana or anywhere else nationwide.

Few buyers purchase 2-4 unit homes, and almost nobody purchases an entire apartment building. Rather, it’s the Housing Starts reports’ “single-family” tally that matters because that’s the home type that the majority of home buyers purchase.

In December, for the fourth straight month, Single-Family Housing Starts increased.

Single-family housing starts climbed 4 percent last month to 470,000 units on a seasonally-adjusted, annualized basis. This is the highest number of Single-Family Housing Starts since April 2010 — the last month of last year’s home buyer tax credit.

The Single-Family Housing Starts data is the latest in a series of data that point to a housing rebound nationwide. New Home Sales, Existing Home Sales, Pending Home Sales and Homebuilder Confidence has each posted multi-month highs and all are poised for strong gains into 2012.

If you’re planning to buy a home in 2012, consider buying in between now and March rather than at some point later. Home prices and mortgage rates are likely to move higher.

Housing Starts

Top Real Estate Headlines for Week Ending: November 5th

The weekend is just a blink away. Before we get lost in our weekend affairs, let’s take a minute to review what the top real estate and mortgage healdines were this week according to the National Association of Realtors.

• Golder: Stand Up for Home Ownership
  “It’s time to tell the world that home ownership is still the heart of the American Dream,” 2010 NAR President Vicki Cox Golder told a packed ballroom of real estate practitioners in New Orleans.
• September Pending Home Sales Slip 1.8%
  Tight credit and appraisals coming in below a negotiated price continue to constrain the market, but there appears to be a pent-up demand that eventually will be unleashed as banks resolve their issues with foreclosures.
• Fed’s Aggressive Policy Sparks Critics
  After the Federal Reserve announced Wednesday that it intended to buy $600 billion in Treasury securities through June, critics warned of inflation and other unintended results.
• 30-Year Mortgage Rates Inch Up
  For the third straight week, 30-year mortgage rates continued their upward climb. The average 15-year rate for the week ended Nov. 4 was 3.63 percent.
• How Election Results Impact Real Estate
  Among other things, 10 of the 12 state attorneys general on the executive committee that have been heading the foreclosure probe lost their re-election bids and won’t be returning to office. What does this mean for real estate?
• Why Reverse Mortgages Are Popular
  Changes to legislation and the housing market are making this financing option attractive for home owners.
• You’re Refinancing Again?
  Owners who refinanced just a year ago might be looking to do it again while rates continue to drop.
• Housing Starts Rise in September
  The U.S. Commerce Department reports that increased spending in commercial projects helped push construction spending up.
• Consumers Put Credit Card Debt Ahead of Mortgage
  A Mortgage Bankers Association panel discussed the shifting priorities of borrowers who now believe paying down credits cards is more important than paying their home loan.
• 3 New Anti-Foreclosure Strategies
  Critics of the government’s Home Affordable Modification Program offer fresh proposals to slow foreclosures.
• Minority Home Ownership Drops Steeper
  While the overall rate of home ownership slipped just 0.7 percent year over year, a much more pronounced slide occurred among the nation’s minorities.

These were the top real estate and mortgage headlines for the week ending November 5, 2010.

Want to know how these national real estate headlines could impact you right here locally in Northwest Indiana? Subscribe to this blog, Today’s Real Estate Reality, and let our collective years of real estate experience in Northwest Indiana guide you to an informed and successful real estate transaction today.

Housing Starts

June Housing Starts Ease But 7x Better Than Headline Data

Single-family Housing Starts eased lower last month, falling by 0.7 percent from May, or 3,000 units nationwide.

A “housing start” is a home on which construction has started.

June’s Housing Starts data is somewhat soft and may partially explain why home builder confidence dropped to its lowest level since April 2009, but for buyers and sellers in Valparaiso Indiana, the Housing Starts report is not nearly as bad as headlines say.

This is because when the press reports on Housing Starts, it doesn’t single out single-family homes. The press lumps every type of home into a single, giant reading. As a result, news outlets are reporting Housing Starts down 5 percent — a somewhat misleading figure.

The 5 percent figure is actually a combination of 3 separate housing types:

1. Single-Family Housing Starts
2. Multi-Unit Housing Starts (2-4 Units)
3. Apartment Building Housing Starts (5 or more units)

But, single-family homes are what most Americans purchase. This is why the single-family starts data is more relevant than the combined figure commonly reported by the press. 2-4 units and apartment buildings are a different realm of buyer.

That said, though, we can’t even be sure that June’s Single-Family Housing Starts report is accurate. As noted in the Department of Commerce’s press release, the data’s margin of error is 10.7 percent which means the reported results are of “no confidence”.

In other words, there is no statistical evidence to prove the actual change was different from zero.

If Housing Starts did drop in June, it will help to reduce the Porter County Indiana housing inventory, which will provide support for local home values. For home sellers, this could be good news. Fewer homes for sale means less competition for buyers.

Housing Starts

Home Sellers Rejoice – Housing Starts Fall To 1-Year Low

Single-family housing starts plummeted to a one-year low in May, just 30 days after soaring to a 20-month high. It’s no wonder home builders are confused.

Against a revised April figure, Housing Starts fell 97,000 units in May, a figure representing almost one-fifth of the total market size.

It’s the worst showing for Housing Starts since May 2009, a surprise to builders and economists alike.

Furthermore, single-family Building Permits plunged in May, too — down 10 percent from April. A permit is a certification from local government that authorizes home construction.

Housing permits are a precursor to Housing Starts with 82% of homes starting construction within 60 days of permit-issuance. Fewer permits, therefore, directly reduces the number of new homes coming to market in the coming months.

For home buyers in Schererville Indiana, this should create a sense of urgency.

Home prices are based on supply and demand and supply appears to be falling about the same time that economists predict a surge in home demand. It could spell rising home prices and a complete loss of negotiation power with home sellers.

For now, home affordability remains high with properties cheap and mortgage rates near all-time lows. If you plan to buy a home later this year, the May 2010 Housing Starts data may be a reason to buy now before home prices rise.

Housing Starts

Housing Starts Rise In April, Home Prices Under Pressure

Single-family Housing Starts rose by 55,000 last month, suggesting ample housing stock from which home buyers in Chesterton Indiana can choose this summer.

The report is a slightly larger read than what economists had expected.

Furthermore, for the first time since June 2009, Housing Starts appears to have broken away from its half-million unit plateau. 593,000 new homes were started in April.

Ordinarily, both Wall Street and Main Street would celebrate a strong housing sector report like this, but the Department of Commerce’s press release also held two cautionary notes.

The first point of caution is a mathematical one.  Although single-family starts increased by 10.2 percent, the survey had a Margin of Error of 10.7 percent. This means that Housing Starts may have fallen by 0.5 percent and the report is statistically worthless.

The second point of caution is tied to Building Permits, a complementary data point in the same Department of Commerce report.  In April, Building Permits fell by almost 11 percent with a tiny Margin of Error of less than 2%.  This tells us that builders are pulling back — a sign of low housing market confidence

According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance. Housing Starts, therefore, should ease though June and July.

Home prices are based on housing’s supply and demand.  For the next few months, supply should elevate, helping prices remain suppressed, after which, supply should dwindle. 

The best time to buy a home, therefore, may be now.  As the summer months come to close, we may find that buyers vastly outweigh sellers.

Housing Starts

Can Housing Expand Even After The Tax Credit Expires?

After a strong March showing and a surprise upward-revision for February, Housing Starts are, once again, trending better.

It’s yet another signal that the housing market nationwide is stabilized.

A Housing Start is a new home on which construction has started and, over the last 6 months, home builders are averaging one half-million starts per month.

This marks the highest 6-month average since 2008 and a reading one-fifth percent better from 12 months ago.  Revisions to prior data have all been higher, too.

Even more interesting, though, is that the number of newly-issued building permits is exploding. Permits were up more than 5 percent last month and have climbed back to the levels of late-2008.

Housing permits are an important data point in housing because permits are precursors to actual housing starts.  According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.

Therefore, because March’s housing permits increased, we should expect Housing Starts to continue to rise into the early months of summer.

This, too, reflects well on housing in Northwest Indiana because the federal home buyer tax credit won’t be in existence this summer. The simple fact that homes are being built now shows that housing in Northwest Indiana is likely to expand even after the tax credit expires.

Non-military members must be under contract by April 30, 2010 and closed by June 30, 2010 in order to claim up to $8,000 in federal tax credits.

Contact James K Barath in Northwest Indiana to Qualify for Your FREE FHA Home Loan Approval Today!

Housing Starts

Housing Starts Steady and It’s Influence on Home Prices

Single-family Housing Starts idled last month, dropping just 3,000 units from the month prior, or 0.2%.

According to the Commerce Department’s report, February marked the 8th straight month in which Housing Starts straddled the half-million marker, dating back to June 2009.

This is a different slant on the Housing Starts story as told by the press.

Most publications are reporting that Housing Starts fell 5.9 percent in February. Technically, this is true.  Housing Starts did fall 5.9 percent last month.  However, the Housing Starts data is comprised of three parts:

1. Single-Family Housing Starts
2. 2-4 Unit Housing Starts
3. “Apartment Building” Housing Starts (i.e. 5 or more units)

The press tends to lump all 3 together but that’s not relevant for everyday homeowners and buyers. 

2-4 unit homes, and apartments and condos are a different housing class as compared to single-family homes and are notoriously volatile, too.  Single-family starts are more steady and better reflect the country’s housing stock.

Single-family housing starts are up 32 percent over the last 12 months. 

Meanwhile, the pace of new buyers has not kept up with the pace of new housing stock. Therefore, because home prices are based on supply-and-demand, the price for a newly-built home was down, on average, 7 percent nationwide in January.

With the federal home buyer tax credit expiring soon, home buyers will likely create new demand for homes. And with Housing Starts holding steady near 500,000, that should push prices higher through the spring months.

Contact James K Barath in Northwest Indiana to Qualify for Your FREE FHA Home Loan Approval Today!

Housing Starts

Don’t Be Fooled by The Recent High in Housing Starts

Sometimes, headlines for housing can be misleading and this week gave us a terrific example.

On Wednesday, the Commerce Department released its Housing Starts data for January 2010. The data showed starts at a 6-month high.

A “Housing Start” is a privately-owned home on which construction has started.

Headlines on the Housing Starts story included:

• U.S. Housing Starts Hit 6-Month High (Reuters)
• U.S. Economy Receives Home Building Boost (Shepparton)
• Housing Starts Post Sharp Rebound (ABC)

Based on the headlines, the housing market looks poised for rapid growth through the Spring Market in Chesterton, Crown Point, Highland, Munster, Portage, Saint John, Schererville and Valparaiso.

The real story, though, is that although Housing Starts increased by close to 3 percent last month, the growth is mostly attributed to buildings with 5 or more units.  This includes apartments and condominiums — a sector of the housing market that’s notoriously volatile.

If we isolate Housing Starts for single-family homes only, we see that starts grew by just 7,000 units last month and have failed to break a range since June 2009.  January’s tally is slightly below the 8-month average.

Perhaps more interesting than the Housing Starts, though, is the Commerce Department’s accompanying data for Housing Permits. After a 5-month plateau that ended in November, Housing Permits posted multi-year highs for the second straight month.

According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.

One reason permits are up is that home builders want to capitalize on the federal homebuyer tax credit’s dwindling time frame.  Sales are expected to spike in March and April and more homes will come online to deal with that demand.  Home buyers should shop carefully, but with an eye on the clock.

As the tax credit’s April 30, 2010 deadline approaches, competition for homes may be fierce.

Contact James K Barath in Northwest Indiana to Qualify for Your FREE FHA Home Loan Approval Today!

Housing Starts

Housing Starts Down Now, But Housing Permits Heat Up

A “Housing Start” is a privately-owned home on which construction has started. It’s an important gauge of housing health because it tracks new housing stock nationwide.

In December 2009, starts fell by nearly 7 percent.

The news is mildly disappointing but not too bad. The likely cause for the Housing Starts drop is December’s rough weather conditions. It’s tough to break ground when Mother Nature won’t coordinate and last month was especially hazardous in Northwest Indiana for the communities of Chesterton and Valparaiso.

More cheery, however, is that for the second straight month, Housing Permits exploded. 

A housing permit is a certification from local government that authorizes construction. After posting a 7 percent gain in November, permits rose by another 8 percent in December.

It’s a signal that housing is, indeed, in recovery — despite the falling number of actual starts. More permits mean that builders plan to bring more homes to Crown Point, Portage, Saint John and Schererville for what’s expected to be a very busy spring home-shopping season.

According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.  Therefore, Housing Starts should start rising soon anyway.

For home buyers in Northwest Indiana, the news couldn’t be better. 

With more homes coming online, competition among home sellers in  Highland and Munster should increase, and that will suppress the rise in home prices nationwide. 

It’s basic economics.  When home supplies grow faster than home demand, prices fall.

Contact Benchmark Mortgage in Northwest Indiana to Qualify for Your FREE FHA Home Loan Approval Today!

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