Has the Housing Recovery Arrived?
The United States Department of Housing and Urban Development released residential construction numbers for October on Tuesday. Data show that housing starts have hit a four-year high, building on a series of good news coming out of the housing sector.
Privately-owned housing starts climbed 3.6 percent month-over-month to a seasonally-adjusted annual rate of 894,000, a 41.9 percent increase over the rate for October 2011. Housing completions grew 14.5 percent month-over-month and 33.6 percent year-over-year to a seasonally-adjusted annual rate of 772,000.
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Strong housing starts follow a National Association of Home Builders report released on Monday that showed builder confidence at its highest level since May 2006. The NAHB/Wells Fargo Housing Market Index grew five points to 46 on the scale between zero and 100. Comments by NAHB chairman Barry Rutenberg echo broad sentiment that the housing market is showing strength.
“Builders are reporting an increasing demand for new homes as inventories of foreclosed and distressed properties begin to shrink in markets across the country,” he said in the report. Distressed home sales accounted for a 0.3 percent decline in home prices from August to September, a blemish on seven consecutive months of year-over-year increases.
“In view of the tightening supply and other improving conditions, many potential buyers who were on the fence are now motivated to move forward with a purchase in order to take advantage of today’s favorable prices and interest rates,” continued Rutenberg. Mortgage prices have been driven to record lows due to QE3, which has the Federal Reserve gobbling up $40 billion in mortgage-backed securities every month for the indefinite future.
According to Freddie Mac the monthly average commitment rate on 30-year fixed-rate mortgages fell from 3.47 in September to 3.38 in October. The rate was 4.07 in October of 2011.
NAHB chief economist David Crowe issued a similar statement as the one he gave in October. “At this point, difficult appraisals and tight lending conditions for builders and buyers remain limiting factors for the burgeoning housing recovery, along with shortages of buildable lots that have begun popping up in certain markets.”
The National Association of Realtors also released a statement on Monday indicating that October total existing-home sales rose 2.1 percent month over month, and 10.9 percent year over year. Distressed home sales were flat month over month at 24 percent of total sales, but down 4 percentage points year over year.
NAR chief economist Lawrence Yun commented that “rising home prices have already resulted in a $760 billion growth in home equity during the past year. Given that each percentage point of price appreciation translates into an additional $190 billion in home equity, we could see close to a $1 trillion gain next year.”