Housing Starts Increased In February
Home construction is starting to increase at an annualized rate of almost 1.2 million in February. After January’s decline in housing starts, it seems that the housing market is back on track to have a strong year.
Last month, housing starts increased by over 7% for single-family homes, a strong gain for one month. The housing market has been one of the strongest parts of the economy in 2016, and February housing starts continue to follow that trend.
Historically low mortgage rates are driving builders to break ground on even more homes. The housing market should continue to grow during 2016.
Single-Family Homes Drive Housing Starts
Housing starts for single-family homes were much stronger than expected.
For most home buyers, the rate at which builders started construction of single-family homes is a good indicator of the future housing market.
This builder confidence is a sign that it is still a good time to buy.
While there is housing start data on multi-family homes, single-family home starts are a more important indicator.
Multi-family homes are typically apartment buildings. So multi-unit building data may help forecast the strength of the rental market, it does not say much about future demand for homes.
Similarly, condominiums are generally considered multi-family homes even though a single family can purchase a unit within the condo project.
Builders have good reason to show more interested in multi-family housing starts than single-family housing starts since starting and completing a multi-family building is more costly and comes with higher risk to the builder.
However, if builders start multi-family projects, it shows confidence in the overall strength of the economy. They will be able to sell or rent their final product.
A robust economy is required for strong housing growth and to indicate future appreciation on your new home.
Building Permits For Single-Family Homes Increased In February
Single-family housing permits also increased in February.
Permits are an even more important indicator of housing market strength.
For a home to be “started,” the builder must first get a permit to build the home. Since permits come at the beginning of the home building process, they tend to be an indicator of where the housing market will be in three to six months.
If permits are increasing, then builders are confident in the future health of the housing market.
Permits for single-family homes have increased by 17 percent over the last year.
The housing market has been growing at a steady rate. The increase in building permits proves that the housing market strong.
Why Do Housing Starts Matter?
A housing start is when the construction of a new home officially breaks ground.
The number of new homes being built helps predict the future health of the housing market. Builders must be confident in the economy and future home sales if they start construction on a home that will be completed in three to six months.
A large number of starts shows optimism in the market, and starts have been increasing steadily over the last six years. Housing starts for single-family homes should continue to increase in March.
Builder Confidence Steadily Increasing
Builders have been steadily increasing their confidence in the housing market.
Currently, builder confidence sits at 58 which is a favorable number. If builder confidence is above 50 it is considered a “good” level. Builder confidence today is higher than it was a year ago.
Along with builder confidence, new single-family home sales have been increasing since 2011. Currently, new home sales are nearly double what they were five years ago.
From both the builder’s and buyer’s side the housing market is showing strength.
What Are Today’s Mortgage Rates?
Low rates have played a big role in improving market conditions. Current rates are at some of their lowest levels of the past year. This has driven the housing market upward.
Low mortgage rates, combined with builder confidence, are promising signs for the future.