Thursday, July 24, 2014
Friday, October 4, 2013
Friday, July 26, 2013
In U.S. cash sales down, short sales up
In U.S. cash sales down, short sales up
IRVINE, Calif. – July 25, 2013 – RealtyTrac released its first-ever U.S. Residential Sales Report, finding that all-cash purchases made up 30 percent of all sales in June, down from 31 percent of all sales in the previous month and a year ago.
A number of Florida metro areas had a high percentage of cash sales, including Cape Coral-Fort Myers, Fla. (70 percent), Miami (64 percent), Sarasota, Fla. (59 percent) and Tampa (58 percent). Las Vegas (62 percent) and Detroit (56 percent) also recorded a high percentage of cash sales.
Institutional investor purchases (sales to non-lending entities that purchased at least 10 properties in the last 12 months) accounted for 9 percent of all U.S. residential sales in June. Florida ranked No. 6 nationally with 12 percent of sales going to institutional investors. Top states include Georgia (23 percent), Nevada (16 percent), Arizona (15 percent), Oklahoma (13 percent) and North Carolina (12 percent).
Sales of bank-owned properties (REO) accounted for 9 percent of all residential sales in June, down from 10 percent in May 2013 and on par with a year ago.
Short sales accounted for 14 percent of all residential U.S. sales in June, according to RealtyTrac, with Florida No. 2 nationally with 29 percent of all sales short sales. Other high short-sale states include Nevada (30 percent), Maryland (21 percent), Tennessee (19 percent) and Arizona (19 percent).
“The U.S. housing market is slowly but surely moving toward a more normalized and sustainable pattern after a flurry of institutional and cash buyers flocked to residential real estate last year, pushing up prices and picking clean the best inventory available in many areas,” says Daren Blomquist, vice president at RealtyTrac.
A number of Florida metro areas had a high percentage of cash sales, including Cape Coral-Fort Myers, Fla. (70 percent), Miami (64 percent), Sarasota, Fla. (59 percent) and Tampa (58 percent). Las Vegas (62 percent) and Detroit (56 percent) also recorded a high percentage of cash sales.
Institutional investor purchases (sales to non-lending entities that purchased at least 10 properties in the last 12 months) accounted for 9 percent of all U.S. residential sales in June. Florida ranked No. 6 nationally with 12 percent of sales going to institutional investors. Top states include Georgia (23 percent), Nevada (16 percent), Arizona (15 percent), Oklahoma (13 percent) and North Carolina (12 percent).
Sales of bank-owned properties (REO) accounted for 9 percent of all residential sales in June, down from 10 percent in May 2013 and on par with a year ago.
Short sales accounted for 14 percent of all residential U.S. sales in June, according to RealtyTrac, with Florida No. 2 nationally with 29 percent of all sales short sales. Other high short-sale states include Nevada (30 percent), Maryland (21 percent), Tennessee (19 percent) and Arizona (19 percent).
“The U.S. housing market is slowly but surely moving toward a more normalized and sustainable pattern after a flurry of institutional and cash buyers flocked to residential real estate last year, pushing up prices and picking clean the best inventory available in many areas,” says Daren Blomquist, vice president at RealtyTrac.
Tuesday, July 23, 2013
June’s national home sales slip, but above year ago
WASHINGTON (July 22, 2013) – Existing-home sales declined in June but have stayed well above year-ago levels for the past two years, while the median price shows seven straight months of double-digit year-over-year increases, according to the National Association of Realtors® (NAR).
Total existing home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, dipped 1.2 percent to a seasonally adjusted annual rate of 5.08 million in June from a downwardly revised 5.14 million in May, but are 15.2 percent higher than the 4.41 million-unit level in June 2012.
NAR Chief Economist Lawrence Yun said there is enough momentum in the market, even with higher interest rates. “Affordability conditions remain favorable in most of the country, and we’re still dealing with a large pent-up demand,” he said. “However, higher mortgage interest rates will bite into high-cost regions of California, Hawaii and the New York City metro area market.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 4.07 percent in June from 3.54 percent in May, and is the highest since October 2011 when it was also 4.07 percent; the rate was 3.68 percent in June 2012.
Total housing inventory at the end of June rose 1.9 percent to 2.19 million existing homes available for sale, which represents a 5.2-month supply at the current sales pace, up from 5.0 months in May. Listed inventory remains 7.6 percent below a year ago, when there was a 6.4-month supply.
“Inventory conditions will continue to broadly favor sellers and contribute to above-normal price growth,” Yun remarked.
The national median existing-home price for all housing types was $214,200 in June, up 13.5 percent from June 2012. This marks 16 consecutive months of year-over-year price increases, which last occurred from February 2005 to May 2006.
Distressed homes – foreclosures and short sales – were 15 percent of June sales, down from 18 percent in May, and are the lowest share since monthly tracking began in October 2008; they were 26 percent in June 2012. The decline in sales of distressed homes, which typically sell at a reduced price, accounts for some of the price growth.
Eight percent of June sales were foreclosures, and 7 percent were short sales. Foreclosures sold for an average discount of 16 percent below market value in June, while short sales were discounted 13 percent.
NAR President Gary Thomas said some owners who were hurt by the downturn are now in the market. “Rising values have improved the position of homeowners, and 16 percent of Realtors surveyed in June report they worked with a client that previously had an underwater mortgage,” he said.
“Of those previously underwater owners, 53 percent were planning to buy another home and 22 percent intend to rent, but 25 percent weren’t sure what they’d do. In addition, 47 percent of Realtors report they have potential sellers who are waiting for additional price appreciation before they sell,” Thomas said.
The median time on market for all homes was 37 days in June, down from 41 days in May, and is 47 percent faster than the 70 days on market in June 2012. Short sales were on the market for a median of 68 days, while foreclosures typically sold in 39 days and non-distressed homes took 35 days. Forty-seven percent of all homes sold in June were on the market for less than a month.
First-time buyers accounted for 29 percent of purchases in June, compared with 28 percent in May and 32 percent in June 2012.
“First-time buyers should be closer to 40 percent of the market, but they’re held back by the frictions of tight credit and very limited inventory in the lower price ranges in most of the U.S.,” Yun said.
All-cash sales made up 31 percent of transactions in June, down from 33 percent in May; they were 29 percent in June 2012. Individual investors, who account for many cash sales, purchased 17 percent of homes in June, down from 18 percent in May and 19 percent in June 2012.
Single-family home sales slipped 1.1 percent to a seasonally adjusted annual rate of 4.50 million in June from 4.55 million in May, but are 14.5 percent above the 3.93 million-unit pace in June 2012. The median existing single-family home price was $214,700 in June, which is 13.2 percent above a year ago.
Existing condominium and co-op sales fell 1.7 percent to an annualized rate of 580,000 units in June from 590,000 in May, but are 20.8 percent higher than the 480,000-unit level a year ago. The median existing condo price was $210,200 in June, up 15.4 percent from June 2012.
Regionally, existing-home sales in the Northeast declined 1.6 percent to an annual rate of 630,000 in June but are 16.7 percent above June 2012. The median price in the Northeast was $270,400, which is 6.8 percent above a year ago.
Existing-home sales in the Midwest were unchanged in June at a pace of 1.21 million, and are 17.5 percent higher than a year ago. The median price in the Midwest was $170,100, up 8.9 percent from June 2012.
In the South, existing-home sales slipped 1.5 percent to an annual level of 2.03 million in June but are 16.0 percent above June 2012. The median price in the South was $186,300, which is 13.7 percent above a year ago.
Existing-home sales in the West declined 1.6 percent to a pace of 1.21 million in June but are 11.0 percent above a year ago. With ongoing supply constraints, the median price in the West was $282,000, a jump of 19.9 percent from June 2012.
© 2013 Florida Realtors®
Statewide housing market data reports delayed
Due to technical issues related to a new MLS provider for several local Realtor associations, Florida Realtors June 2013 Florida Housing Market data report is delayed. The report will be available as quickly as possible once the issue has been resolved.
Total existing home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, dipped 1.2 percent to a seasonally adjusted annual rate of 5.08 million in June from a downwardly revised 5.14 million in May, but are 15.2 percent higher than the 4.41 million-unit level in June 2012.
NAR Chief Economist Lawrence Yun said there is enough momentum in the market, even with higher interest rates. “Affordability conditions remain favorable in most of the country, and we’re still dealing with a large pent-up demand,” he said. “However, higher mortgage interest rates will bite into high-cost regions of California, Hawaii and the New York City metro area market.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 4.07 percent in June from 3.54 percent in May, and is the highest since October 2011 when it was also 4.07 percent; the rate was 3.68 percent in June 2012.
Total housing inventory at the end of June rose 1.9 percent to 2.19 million existing homes available for sale, which represents a 5.2-month supply at the current sales pace, up from 5.0 months in May. Listed inventory remains 7.6 percent below a year ago, when there was a 6.4-month supply.
“Inventory conditions will continue to broadly favor sellers and contribute to above-normal price growth,” Yun remarked.
The national median existing-home price for all housing types was $214,200 in June, up 13.5 percent from June 2012. This marks 16 consecutive months of year-over-year price increases, which last occurred from February 2005 to May 2006.
Distressed homes – foreclosures and short sales – were 15 percent of June sales, down from 18 percent in May, and are the lowest share since monthly tracking began in October 2008; they were 26 percent in June 2012. The decline in sales of distressed homes, which typically sell at a reduced price, accounts for some of the price growth.
Eight percent of June sales were foreclosures, and 7 percent were short sales. Foreclosures sold for an average discount of 16 percent below market value in June, while short sales were discounted 13 percent.
NAR President Gary Thomas said some owners who were hurt by the downturn are now in the market. “Rising values have improved the position of homeowners, and 16 percent of Realtors surveyed in June report they worked with a client that previously had an underwater mortgage,” he said.
“Of those previously underwater owners, 53 percent were planning to buy another home and 22 percent intend to rent, but 25 percent weren’t sure what they’d do. In addition, 47 percent of Realtors report they have potential sellers who are waiting for additional price appreciation before they sell,” Thomas said.
The median time on market for all homes was 37 days in June, down from 41 days in May, and is 47 percent faster than the 70 days on market in June 2012. Short sales were on the market for a median of 68 days, while foreclosures typically sold in 39 days and non-distressed homes took 35 days. Forty-seven percent of all homes sold in June were on the market for less than a month.
First-time buyers accounted for 29 percent of purchases in June, compared with 28 percent in May and 32 percent in June 2012.
“First-time buyers should be closer to 40 percent of the market, but they’re held back by the frictions of tight credit and very limited inventory in the lower price ranges in most of the U.S.,” Yun said.
All-cash sales made up 31 percent of transactions in June, down from 33 percent in May; they were 29 percent in June 2012. Individual investors, who account for many cash sales, purchased 17 percent of homes in June, down from 18 percent in May and 19 percent in June 2012.
Single-family home sales slipped 1.1 percent to a seasonally adjusted annual rate of 4.50 million in June from 4.55 million in May, but are 14.5 percent above the 3.93 million-unit pace in June 2012. The median existing single-family home price was $214,700 in June, which is 13.2 percent above a year ago.
Existing condominium and co-op sales fell 1.7 percent to an annualized rate of 580,000 units in June from 590,000 in May, but are 20.8 percent higher than the 480,000-unit level a year ago. The median existing condo price was $210,200 in June, up 15.4 percent from June 2012.
Regionally, existing-home sales in the Northeast declined 1.6 percent to an annual rate of 630,000 in June but are 16.7 percent above June 2012. The median price in the Northeast was $270,400, which is 6.8 percent above a year ago.
Existing-home sales in the Midwest were unchanged in June at a pace of 1.21 million, and are 17.5 percent higher than a year ago. The median price in the Midwest was $170,100, up 8.9 percent from June 2012.
In the South, existing-home sales slipped 1.5 percent to an annual level of 2.03 million in June but are 16.0 percent above June 2012. The median price in the South was $186,300, which is 13.7 percent above a year ago.
Existing-home sales in the West declined 1.6 percent to a pace of 1.21 million in June but are 11.0 percent above a year ago. With ongoing supply constraints, the median price in the West was $282,000, a jump of 19.9 percent from June 2012.
© 2013 Florida Realtors®
Friday, July 19, 2013
Jumbo mortgage loans are back on the table
Jumbo mortgage loans are back on the table
CHICAGO – July 18, 2013 – It’s a good time to buy an expensive home.
Jumbo mortgage loans, which sizzled during the housing market’s run-up and then fizzled spectacularly, are back with more flexible products from more lenders and interest rates that are inching ever closer to the terms offered to buyers of much less luxurious homes.
As a result, more consumers are able to consider the purchase of luxury homes, a market that has been long stalled. Nationally, the annual dollar volume of jumbo loans is on pace to be the best since 2007, and a growing field of lenders is seeking to build a customer base or cement established relationships by offering those mortgages.
“For a long time, it was, ‘Oh, God, wait and see what happens with the mortgage,’” said Matt Farrell, managing partner of Urban Real Estate in Chicago. “The banks have a renewed confidence in the collateral.”
During the housing industry’s darkest days when private investor interest in mortgages was nil, the overwhelming majority of mortgages written were either Federal Housing Administration-backed loans or mortgages that met Fannie Mae or Freddie Mac standards and were then sold to either agency. The loan limit for those loans in most parts of the country is $417,000.
Even during the downturn, lenders continued to make some jumbo loans to their very best clients – those with stellar financial pedigrees that included high credit scores, high cash reserves and sizable downpayments, sometimes of more than 30 percent of the purchase price. The loans were held on the lender’s own books.
What’s different today is that demand for big loans is on the rise, and lenders are eagerly stepping in at a time of recovering home prices and improved economic reports. Jumbo loan volume still pales in comparison with the market’s headier days, but there are also successful efforts to bundle and sell jumbo mortgage securities to private investors.
Jumbo loan originations totaled $203 billion last year. If the first-quarter pace of $54 billion continues, $216 billion of jumbo loans could be written this year, according to Inside Mortgage Finance, a trade publication. About 7 percent of that first-quarter volume was bundled and sold to private investors on the secondary market.
“The jumbo market we have now was created in 2009 after the crash and is very conservatively underwritten,” said Guy Cecala, CEO and publisher of Inside Mortgage Finance. “The good news for jumbo borrowers is in terms of underwriting or choice, the market is the best it’s been in the past five years.”
Higher fees charged by Fannie Mae and Freddie Mac are shrinking the interest rate spread between conforming and jumbo loans, as is competition by lenders to woo high-net-worth customers. At the end of June, for example, the average interest rate for a 30-year, fixed-rate jumbo mortgage was only 0.17 percentage point higher than a conventional loan, compared with a 0.5 percentage point difference a year earlier, according to financial publisher HSH.com.
That spread had climbed as high as 1.8 percentage points in December 2008, when the average interest rates were 5.2 percent for a 30-year, fixed-rate conforming loan and 7 percent for a jumbo mortgage.
“The spread is crazy right now. It’s so close right now,” said Randy Ernst, a vice president of mortgage lending at Guaranteed Rate. “Underwriting is still tough, but (lenders) want to do the business right now.
“It’s a risk-reward thing. You look at the client in the jumbo sector. They’re very good clients. A lot of my jumbo clients have a lot of money in the bank.”
“It’s easier than it was a year to two years ago,” agreed Eric Schuppenhauer, Chase’s head of mortgage originations.
Dr. Matthew Flak and his wife, Sarah Payne, recently decided it was time to move out of the 1,000-square-foot Chicago condo they shared with a dog and two cats, but they were unsure what kind of mortgage they could get, since Flak had a business loan tied to his dental practice.
To their delight, the couple was able to secure a jumbo loan to purchase a $657,000, 4,000-square-foot home in Orland Park, Ill., two weeks ago that required a 10 percent downpayment on a 3.75 percent adjustable-rate mortgage. They plan to refinance the loan into a fixed-rate jumbo loan before the end of the year.
“I wanted to buy a home that we were going to be in for a long time,” Flak said. “It’s a little more than I wanted to spend right now, but it’s only going to get more expensive. I didn’t want to have to buy a house and then go buy another house in five to seven years. If (the rates) go up maybe 2 percentage points, maybe it’s prohibitive for us.”
That kind of flexibility has been key to getting deals done, and it can vary from lender to lender.
For instance, Chase is offering a jumbo mortgage with an 80 percent loan-to-value to customers who have a 770 FICO score. With a downpayment of 25 percent, a borrower may qualify with a FICO score of 735 or 750.
Wintrust is offering a 30-year fixed jumbo mortgage of up to $1 million to customers with a 740 FICO score and a 10 percent downpayment. One existing bank customer, a local executive of an international company, had a FICO score of 650 and wanted to buy a $1.5 million home in Chicago’s North Shore area. Wintrust approved the loan, with a 25 percent downpayment, and will hold it on its own books.
“You’re not seeing a secondary market for that,” said Ryan Mecum, a Wintrust assistant vice president who will close 16 jumbo purchase loans this month, twice what he did a year ago, in what he calls an “intensively competitive environment” for jumbo customers.
“In ‘08 they were in a $450,000 property and would have bought a $700,000 property,” said Urban Real Estate’s Farrell. “They’ve been putting money in their savings account for five years. They’re going out and skipping that and looking at $1 million, $1.2 million homes.”
Copyright © 2013 Chicago Tribune. Distributed by MCT Information Services.
Jumbo mortgage loans, which sizzled during the housing market’s run-up and then fizzled spectacularly, are back with more flexible products from more lenders and interest rates that are inching ever closer to the terms offered to buyers of much less luxurious homes.
As a result, more consumers are able to consider the purchase of luxury homes, a market that has been long stalled. Nationally, the annual dollar volume of jumbo loans is on pace to be the best since 2007, and a growing field of lenders is seeking to build a customer base or cement established relationships by offering those mortgages.
“For a long time, it was, ‘Oh, God, wait and see what happens with the mortgage,’” said Matt Farrell, managing partner of Urban Real Estate in Chicago. “The banks have a renewed confidence in the collateral.”
During the housing industry’s darkest days when private investor interest in mortgages was nil, the overwhelming majority of mortgages written were either Federal Housing Administration-backed loans or mortgages that met Fannie Mae or Freddie Mac standards and were then sold to either agency. The loan limit for those loans in most parts of the country is $417,000.
Even during the downturn, lenders continued to make some jumbo loans to their very best clients – those with stellar financial pedigrees that included high credit scores, high cash reserves and sizable downpayments, sometimes of more than 30 percent of the purchase price. The loans were held on the lender’s own books.
What’s different today is that demand for big loans is on the rise, and lenders are eagerly stepping in at a time of recovering home prices and improved economic reports. Jumbo loan volume still pales in comparison with the market’s headier days, but there are also successful efforts to bundle and sell jumbo mortgage securities to private investors.
Jumbo loan originations totaled $203 billion last year. If the first-quarter pace of $54 billion continues, $216 billion of jumbo loans could be written this year, according to Inside Mortgage Finance, a trade publication. About 7 percent of that first-quarter volume was bundled and sold to private investors on the secondary market.
“The jumbo market we have now was created in 2009 after the crash and is very conservatively underwritten,” said Guy Cecala, CEO and publisher of Inside Mortgage Finance. “The good news for jumbo borrowers is in terms of underwriting or choice, the market is the best it’s been in the past five years.”
Higher fees charged by Fannie Mae and Freddie Mac are shrinking the interest rate spread between conforming and jumbo loans, as is competition by lenders to woo high-net-worth customers. At the end of June, for example, the average interest rate for a 30-year, fixed-rate jumbo mortgage was only 0.17 percentage point higher than a conventional loan, compared with a 0.5 percentage point difference a year earlier, according to financial publisher HSH.com.
That spread had climbed as high as 1.8 percentage points in December 2008, when the average interest rates were 5.2 percent for a 30-year, fixed-rate conforming loan and 7 percent for a jumbo mortgage.
“The spread is crazy right now. It’s so close right now,” said Randy Ernst, a vice president of mortgage lending at Guaranteed Rate. “Underwriting is still tough, but (lenders) want to do the business right now.
“It’s a risk-reward thing. You look at the client in the jumbo sector. They’re very good clients. A lot of my jumbo clients have a lot of money in the bank.”
“It’s easier than it was a year to two years ago,” agreed Eric Schuppenhauer, Chase’s head of mortgage originations.
Dr. Matthew Flak and his wife, Sarah Payne, recently decided it was time to move out of the 1,000-square-foot Chicago condo they shared with a dog and two cats, but they were unsure what kind of mortgage they could get, since Flak had a business loan tied to his dental practice.
To their delight, the couple was able to secure a jumbo loan to purchase a $657,000, 4,000-square-foot home in Orland Park, Ill., two weeks ago that required a 10 percent downpayment on a 3.75 percent adjustable-rate mortgage. They plan to refinance the loan into a fixed-rate jumbo loan before the end of the year.
“I wanted to buy a home that we were going to be in for a long time,” Flak said. “It’s a little more than I wanted to spend right now, but it’s only going to get more expensive. I didn’t want to have to buy a house and then go buy another house in five to seven years. If (the rates) go up maybe 2 percentage points, maybe it’s prohibitive for us.”
That kind of flexibility has been key to getting deals done, and it can vary from lender to lender.
For instance, Chase is offering a jumbo mortgage with an 80 percent loan-to-value to customers who have a 770 FICO score. With a downpayment of 25 percent, a borrower may qualify with a FICO score of 735 or 750.
Wintrust is offering a 30-year fixed jumbo mortgage of up to $1 million to customers with a 740 FICO score and a 10 percent downpayment. One existing bank customer, a local executive of an international company, had a FICO score of 650 and wanted to buy a $1.5 million home in Chicago’s North Shore area. Wintrust approved the loan, with a 25 percent downpayment, and will hold it on its own books.
“You’re not seeing a secondary market for that,” said Ryan Mecum, a Wintrust assistant vice president who will close 16 jumbo purchase loans this month, twice what he did a year ago, in what he calls an “intensively competitive environment” for jumbo customers.
“In ‘08 they were in a $450,000 property and would have bought a $700,000 property,” said Urban Real Estate’s Farrell. “They’ve been putting money in their savings account for five years. They’re going out and skipping that and looking at $1 million, $1.2 million homes.”
Copyright © 2013 Chicago Tribune. Distributed by MCT Information Services.
Wednesday, July 17, 2013
Builders start work on fewer homes in June
WASHINGTON (AP) – July 17, 2013 – U.S. builders started work on fewer homes in June, mostly because apartment construction fell sharply. But applications for permits to build single-family houses rose to the highest level in five years, suggesting the housing recovery will continue.
Developers began construction at a seasonally adjusted annual rate of 836,000 homes in June, the Commerce Department said Wednesday. That was nearly 10 percent below May’s total of 928,000, which was revised higher, and was the fewest since August 2012.
Most of the drop occurred in apartments, where starts fell almost 27 percent in June from May. Apartment construction is volatile from month-to-month.
Applications for permits to build single-family homes rose for the third straight month to 624,000, the highest since May 2008. That suggests home construction should rebound in the coming months. Overall permits fell to 911,000 in June from 985,000 in May, which was also revised higher.
Despite June’s decline, builders started work on 10 percent more homes last month compared with a year earlier. And permits are 16 percent higher than a year ago.
“Today’s drop in starts is more a pause in an otherwise improving trend,” said Jonathan Basile, an economist at Credit Suisse.
The housing recovery has been helping support the economy at a critical time when manufacturing and business investment have stagnated.
Steady job growth and low mortgage rates have fueled more home sales. The increased demand, along with a tight supply of homes for sale, has pushed home prices higher. That’s encouraged builders to start more homes and create more construction jobs.
Confidence among homebuilders rose this month to its highest level since January 2006, according to a monthly survey by the National Association of Home Builders. Measures of customer traffic, current sales conditions and builders’ outlook for single-family home sales over the next six months vaulted to their highest levels in at least seven years.
Rising home prices also tend to make homeowners feel wealthier and more likely to spend. That drives more growth because consumers’ spending accounts for roughly 70 percent of economic activity.
One concern is that mortgage rates have started to rise from their record lows and could spike further if the Federal Reserve slows its stimulus. Average rates on a 30-year mortgage rose to 4.5 percent this week, the highest in two years, according to mortgage buyer Freddie Mac.
Higher mortgage rates could slow the housing rebound, although most economists aren’t concerned. They note that other factors are more important to the recovery, such as steady job gains, economic growth and an increasing willingness among banks to lend.
Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to NAHB statistics.
Copyright © 2013 The Associated Press, Christopher S. Rugaber, AP economics writer
Developers began construction at a seasonally adjusted annual rate of 836,000 homes in June, the Commerce Department said Wednesday. That was nearly 10 percent below May’s total of 928,000, which was revised higher, and was the fewest since August 2012.
Most of the drop occurred in apartments, where starts fell almost 27 percent in June from May. Apartment construction is volatile from month-to-month.
Applications for permits to build single-family homes rose for the third straight month to 624,000, the highest since May 2008. That suggests home construction should rebound in the coming months. Overall permits fell to 911,000 in June from 985,000 in May, which was also revised higher.
Despite June’s decline, builders started work on 10 percent more homes last month compared with a year earlier. And permits are 16 percent higher than a year ago.
“Today’s drop in starts is more a pause in an otherwise improving trend,” said Jonathan Basile, an economist at Credit Suisse.
The housing recovery has been helping support the economy at a critical time when manufacturing and business investment have stagnated.
Steady job growth and low mortgage rates have fueled more home sales. The increased demand, along with a tight supply of homes for sale, has pushed home prices higher. That’s encouraged builders to start more homes and create more construction jobs.
Confidence among homebuilders rose this month to its highest level since January 2006, according to a monthly survey by the National Association of Home Builders. Measures of customer traffic, current sales conditions and builders’ outlook for single-family home sales over the next six months vaulted to their highest levels in at least seven years.
Rising home prices also tend to make homeowners feel wealthier and more likely to spend. That drives more growth because consumers’ spending accounts for roughly 70 percent of economic activity.
One concern is that mortgage rates have started to rise from their record lows and could spike further if the Federal Reserve slows its stimulus. Average rates on a 30-year mortgage rose to 4.5 percent this week, the highest in two years, according to mortgage buyer Freddie Mac.
Higher mortgage rates could slow the housing rebound, although most economists aren’t concerned. They note that other factors are more important to the recovery, such as steady job gains, economic growth and an increasing willingness among banks to lend.
Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to NAHB statistics.
Copyright © 2013 The Associated Press, Christopher S. Rugaber, AP economics writer
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