US Housing Starts Increase to Four-Year High

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The Commerce Department released figures today that show that US housing starts increased by 3.6 percent for the month of October to an annual rate of 894,000, the fastest growth seen since July of 2008. Economists originally suggested a median estimate of a fall to 840,000.

It was also found that building permits issues decreased 2.7 percent to a seasonally adjusted annual rate of 866,000 compared to 890,000 during the month of September, but permits still experienced a 29.8 percent increase from the same time one year ago.

According to Bloomberg, one possible reason for the increase in housing starts in the continuation of record low mortgage rates combined with a lower risk that property values will continue to fall, thus attracting more buyers.

Mortgage News Daily found that starts for single family units decreased 0.2 percent from 595,000 in September to 594,000, but starts for multi-family units increased from 259,000 in September to 285,000. Additionally, starts for privately owned housing units increased 14.5 percent from 674,000 in September to 772,000.

Housing starts were recognized most directly within the Midwestern and Western portions of the US. The Midwest experienced an increase of 4.1 percent for permits and 8.9 percent for starts. In comparison, the West experienced a decrease of 10.7 percent for permits, but an impressive 17.2 percent increase for starts.

Builder confidence, as identified by the National Association of Home Builders, rose to a six-year high of 46, and while not yet reflecting an equal number of home builders who view sales conditions as either positive or negative, the amount grew to its highest level since May 2006 at a jump not seen since September 2002. Findings also show that homebuilding is expected to add gross domestic product growth this year for the first time since 2005.

As Reuters explains, the housing market has made a turnaround since collapsing during the 2008 recession. Housing recovery, rising home sales, rising prices, and increases in home construction have largely been driven by a pent-up demand by homebuyers.

Housing is now seen as an outlet to boost the economy as targeted by the Federal Reserve. In September, the Fed announced that it would buy $40 billion in mortgage backed securities each month until there was significant improvement in US employment. Federal Reserve Chairman Ben Bernanke has singled housing as one of the most crucial industries to place focus on in order to continue towards economic recovery.

“Continued weakness in housing — reflected in falling prices, low rates of new construction, and historic levels of foreclosure — has proved a powerful headwind to recovery,” Bernanke said in a Nov. 15 speech in Atlanta, Georgia. “It is encouraging, therefore, that we are seeing signs of improvement in the housing market in most parts of the country.”

housingstartsgraph2 US Housing Starts Increase to Four Year High

Graph courtesy of Mortgage News Daily

housingstartsgraph US Housing Starts Increase to Four Year High

Graph courtesy of Mortgage News Daily

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