This is good news! The Commerce Department reported that housing starts soared 17% in May. Housing starts increased to 532,000 from 454,000 the prior month. Projections were for an increase to only 485,000.
Here are the supporting numbers:
- Permits rose to 518,000, up from 498,000. Forecasts were for 508,000.
- Single family homes rose 7.5% to 401,000, the third straight monthly gain.
- Starts were up 29% in the west.
- There was a 17% increase in the south.
- They were up 11% in the Midwest.
- The Northeast was up by only 2%.
- Sales of new and existing homes rose in April, as did signing of new contracts to buy.
We should note that the market is still weak, however, with home starts down 45% from a year ago, and builders still face competition from existing properties.
Mortgage rates have risen with the rate for a 30-year fixed mortgage at 5.57% in the week ending June 5.
The market is being spurred on by falling prices and a tax incentive of $8,000.00 for first time buyers.
Overall then, we must say that things are getting better in the housing sector. Home building usually picks up in the spring, and this year seems to follow traditional patterns.
Has the housing market hit bottom?
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Reader Comments (Page 1 of 1)
6-16-2009 @ 12:37PM
Iridium said...
It is no surprise that housing starts would increase in May. The mortgage rates were extremely low. This will change in June thogh as mortgage rates are almost a point higher than they were in may.
The $8000 tax credit has lured a lot of buyers but it is not enough as banks shot back and increased fees to soak up that extra cash. You need over $10k to close on a $135k house with a FHA loan.
Another thing helping builders in May were dramatic cuts in new housing developments. I recieved a lot of offers to buy a new house. New construction that started at $275k two years ago now starts at $135k. This along with a free $20k in upgrades. A house that would have cost you $325k two years ago can be had for $180k. You would almost be stupid not to jump at that if you could.
The sweet spot for a mortgage for many young people is under $1000 a month inclusive. Go above that and they will stay away. Only a rate under 5% and a price around $130k can give that. If they can't get under $1000 a month they will continue to rent.
Another thing seen as good news is actually bad news. There was a massive increase in multifamily dwellings. All those people who lost thier home to forclosure are not buying new houses. They are moving to apartments. Not exactly the scenario you want for a rosy picture.
Every green shoot is just a weed. Some weeds look like wildflowers. Doesn't mean you want them in your yard.