Housing Starts Jump as National Mortgage Demand Picks Up
Home building may be ready to shake off its 2006 slump. A recent government report shows that housing starts posted their biggest jump since January.
Typically, this occurs when developers are confident that mortgage loan demand across the nation won’t be far behind.
Unfortunately, the report also showed that building permits, seen as a sign of builder confidence, fell more than expected. CNN had the story.
A positive sign: Nevertheless, the housing starts number was seen by some as a signal that home building has hit bottom and is ready for a recovery. At the very least, the housing market appears more resilient than many experts had assumed.
“The worst may be over,” said Rich Yamarone, director of economic research at Argus Research. “No, it’s not blistering. But we’re not in the housing boom anymore. When you put it in this historical perspective, you can’t call this anything other than strong.”
The number of new projects that home builders started rose to an annual pace of 1.77 million in September, according to the Census Bureau, from the 1.67 million pace in August.
While this rate is well below all the monthly readings from the second half of 2003 through the first half of this year, it’s still a solid number. Only one month in the 10-year period from 1992 through 2001 had more starts.
Are builders preparing for an onslaught of home mortgage applications? It would appear that way, as they must think current inventory will soon be used up.
Still, the pace of building permits fell, coming in at a rate of 1.62 million, down from 1.73 million in August. Economists were looking for this sign of builder confidence in the market to barely edge lower.
The disconnect between the two numbers surprised David Seiders, chief economist with the National Association of Home Builders (NAHB), who said builders seemed to be working through a backlog of home permits they held for properties where they had not started construction.
He doesn’t see cause for concern.
“If both permits and starts were up I’d be scared because I think there are still inventory issues that we need to work through,” he said. “I hope the bounce in starts is a temporary phenomenon. I think it’s inevitable that starts will be down in October.”
This is due to the large number of properties still on the market. As more people apply for home loans and sweep them up, builders will respond by increasing permits and starts.