Construction activity up in September, rates partially to thankby Marcie Geffner
Sales of new single-family houses rose to a seasonally adjusted annualized rate of 389,000 in September, according to data released jointly by the U.S. Census Bureau and U.S. Department of Housing and Urban Development (HUD). That pace, which represents an estimate of total sales if the current rate continued for 12 months, was up 5.7 percent compared with August and up 27.1 percent compared with September 2011. The median price of these homes was $242,400 last month.
A total of 145,000 new houses were for sale at the end of the month, representing a seasonally adjusted supply of 4.5 months at the September pace of sales.
More home-building activity
Builders have responded to the higher demand by increasing both production and permits, according to the Census Bureau and HUD. In September, the pace of construction rose to a seasonally adjusted annualized rate of 872,000 units while permit issuance jumped 11.6 percent to 894,000 units. Those figures were the strongest seen in both categories since July 2008.
Barry Rutenberg, a home builder in Gainesville, Fla., and chairman of the National Association of Home Builders (NAHB), characterized the surge in activity as encouraging, but also said in a statement that builders still face significant challenges and “a long way to go back to a fully functioning market.”
David Crowe, chief economist for the NAHB, noted that a housing recovery was “solidly underway in a growing number of markets nationwide,” but even the heightened activity was still only at the halfway mark of what would be considered normal new-home construction in a healthy economy.
Builders see better outlook
Builders are feeling more confident about their business prospects, according to the latest NAHB/Wells Fargo Housing Market Index, which hit its strongest level since June 2006.
“The slight gain is an indication that, while still moving forward, the speed at which the housing recovery is proceeding is being moderated by the various constraints such as tight credit, difficult appraisals and more recently, the limited inventory of buildable lots in certain markets,” Crowe said in a statement. “These factors make it difficult for builder confidence to reach and surpass the 50-point mark, at which an equal number of builders view sales conditions as good versus poor.”
Buyers responding to mortgage rates
While certainly not the only factor that’s driving more buyers to the new-home market, historically low mortgage interest rates have increased purchasing power, making the added costs of new construction a little more affordable.
The latest mortgage rates report from HSH.com shows that the rates on the two most popular types of mortgages did inch upward in the last week, but still remain at incredibly low levels.
Mortgage Rates Radar
According to the latest Mortgage Rates Radar, the average rate for conforming 30-year fixed-rate mortgages rose by six basis points (0.06 percent) to 3.58 percent, while the conforming 5/1 Hybrid ARM rates increased by a single basis point, closing the Wednesday-to-Tuesday wraparound weekly survey at an average of 2.71 percent.
“Better news about the economy has firmed mortgage rates a little,” said Keith Gumbinger, vice president of HSH.com. “But there’s little reason to expect any kind of continued rise at the moment. The Federal Reserve’s program of purchasing mortgages under QE3 will keep rates from moving much, but they will move both upward and downward from time to time as the economic tide ebbs and flows.”
The latest Federal Reserve policy-setting meeting concludes today. No change to monetary policy is expected, and the statement that accompanies the close of the meeting will likely express some cautious optimism about the present state of the economy.
“Since the last meeting, the combined tenor of economic reports has been better; September especially appears to have been a pretty solid month,” adds Gumbinger. “However, there are still plenty of troubles in our own economy and those of other nations, and mortgage rates may again decline if investors become unnerved and prefer to stash cash in the safety of U.S. Treasury bonds.”