More Homes Being Built Today Than A Year Ago
The general consensus with the current housing market is that there is a shortage of homes.
Despite high levels of buyer interest, there are not enough homes available to meet the desires of home buyers.
However, new homes are being added to the housing market regularly, and there are signs that the number of available homes might improve.
The number of homes that began construction in the month of March was nearly 15% higher than March of 2015. In real terms, this is a difference of an annualized rate of roughly 200,000 homes.
Homes have been getting built at a fast clip for the past few months as well, so potential home buyers that are wary of the current market’s number of available homes should begin to see signs of improvement.
More homes are being built today than a year ago. Home shoppers who might have had trouble finding the right home in the past may have more options available to them soon.
With mortgage rates at their lowest levels in years, home buyers should stay optimistic about the big spring season.
March’s Housing Starts
New homes that have begun construction are defined as housing starts. Each month, the annualized rate of new housing starts for the prior month is reported.
Most recent numbers report the number of starts for the month of March.
Overall, March performed slightly weaker than previous months. The number of starts dipped to just below an annualized rate of 1.1 million.
However, March’s housing starts were well above March 2015’s housing starts. The current number of housing starts is also much higher than most numbers found over the past four years.
Along with housing starts, the number of permits for March was reported. Permits need to be acquired before a house can begin construction, so they help predict what housing starts will look like in the coming months. Permits also fell to just below 1.1 million.
The general consensus prior to the housing starts report was that both starts and permits would not change much. However, both fell during March. While this could be seen as the housing market slowing down, it may just be builders preparing for what is traditionally a slower buying season.
Why Do Housing Starts Matter?
New homes can take a while to complete construction. Most assume that homes take three to six months to build.
Because homes take so long to complete, housing starts are an excellent measure of what the future health of the housing market is going to be. Builders will only want to build homes if they can be sold, so few homes will be built if the market is going to slow down.
While March’s housing starts might fall into the spring season, many of the houses won’t be completed until September, or perhaps later. So March’s numbers represent where home builders think the market is going to be three to six months down the road.
According to the numbers, builders may be more optimistic about the future of the housing market than they have been in March the past four years.
If finding available housing has been an issue this spring, there is a chance that more homes will become available in the coming months. When buyer demand inevitably begins to shrink, home shoppers might be able to find the right home.
Fortunately for those who plan to wait, homes may be more affordable as demand decreases since buyers will be able to avoid “bidding wars” with other potential buyers. Also, mortgage rates have shown no signs of increasing to high levels.
While the spring season may not have been ideal for every home buyer, there is plenty to be optimistic about over the next few months.