Housing starts jump
According to the U.S. Commerce Department, housing starts rose 6.9 percent from May to June, hitting its highest rate since October 2008, despite multifamily starts slowing as they continue to be the most volatile sector. Single-family housing starts rose for the fourth consecutive month, reaching a two-year high.
Permit levels are typically used as a measure of future ground breakings, which fell 3.7 percent in June, after May’s levels that had hit a three-year high. Just like starts, multi-family permits fell, while single-family permit levels are at a two-year high.
Single family housing starts fell slightly in the Midwest and South in June, but rose an impressive 37 percent in the west and 22 percent in the Northeast.
Today’s report from the Commerce Department echoes the improving builder confidence reports from the National Association of Home Builders who just reported yesterday that builder confidence hit its highest point in nearly a decade.
Small signs of a recovery in the market
Meanwhile, last week, the Freddie Mac Weekly Primary Mortgage Market Survey (PMMS), revealed that mortgage interest rates fell across the board from the week prior. Freddie Mac reports the average 30-year fixed rate mortgage (FRM) is at 3.56 percent, a 15-year fixed rate mortgage fell to 2.86 percent, and a 5/1 adjustible rate mortgage (ARM) hit 2.74 percent.
Mortgages continue to remain at historic lows, and mortgage application volume is improving, and the growing consensus is that housing construction could contribute to the economic growth this year for the first time since 2005, but builders and consumers continue to be challenged with tight lending conditions, and builders are competing with discounted short sales and foreclosure.
Housing starts and builder confidence levels are both making historic strides, yet both remain under the level that would be considered healthy, so while building activity is increasing, these are merely signs of life in a sector of the economy that has been struggling to stay alive for many years, but has weathered the economic storm and is slowly gaining confidence.