New Housing Starts Slow…
New seasonally adjusted housing starts are slow
I personally believe that in addition to rising interest rates (although the some of the lowest rates in history) lowering the ability to purchase, slow job growth is a huge factor as well are part of the reason new housing starts are slow. Although some analysts say the unemployment rate is down, this is due to a large portion of the unemployed who stopped looking. To top it off, many of the jobs created are service industry jobs, which tend to pay poorly. So, while the demand may very well be there, the ability of the buyer to purchase is not up to par yet and the fundamental issues have still yet to be worked out, such as real wage growth (wages adjusted for inflation), and many other metrics.
Although, interestingly, houses priced $500,000 and above have enjoyed very hearty price increases while the lower price point properties from $0 to $100,000 to $100,001 to $250,000 have seen very little by comparison, or even negative growth. Of course, all real estate is local, and these stats are based largely upon regional and national datas.
So, if you’re into flipping houses, high end is probably a good bet for now.
Source of the below article: http://blogs.wsj.com/developments/2014/01/17/housing-starts-forecast-for-2014-past-is-not-prologue/
Blame it on rising interest rates.
The U.S. Census Bureau announced Friday that housing construction starts totaled an estimated 923,400 units for 2013. That’s less than many analysts’ initial forecasts for the year and well below the long-term annual average of roughly 1.5 million starts.
Home builders, economists and analysts long have pointed to several factors that crimped the supply of new homes in the U.S. last year, including scarcity of buildable lots and tight labor markets in some regions. But many say the bigger culprit was weakened demand due to the 1-percentage-point rise in rates from May to September.
“I suspect that builders could have built up to 1 million units even with the supply issues they were facing,” said David Crowe, chief economist for the National Association of Home Builders. “They didn’t, only because consumer demand weakened a bit as buyers saw mortgage rates rise.”
Not that anyone needs help remembering at this point, but the rate for a 30-year, fixed-rate mortgage jumped to 4.57% in September from 3.35% in May, according to Freddie Mac. The rate since has retreated a bit from that high to 4.41% this week, but it was the speed of the May-September rise that spooked buyers.
On Friday, Census said that housing starts in December registered a seasonally adjusted annual rate of 999,000. That is 9.8% less than the revised November rate of 1.1 million, but it’s 1.6% greater than the December 2012 rate. The 2013 total of 923,400 starts amounts to an 18.3% increase from the full-year tally for 2012.
Census added that home-building permits issued in 2013 totaled 974,700 units, up 17.5% from 2012.
Many economists predict a better year for home construction this year than last. The NAHB has forecast 1.2 million starts for this year. Zelman predicts nearly 1.06 million. J.P. Morgan, nearly 1.08 million. Barclays, 1.2 million. Even UBS has made a relatively bold bet of 1.15 million starts.
Mr. Gapen, the Barclays economist, foresees personal disposable income for U.S. households posting gains this year. He sees home prices appreciating by 7% to 8% on top of last year’s gains of 11% to 12%. He expects that more buyers will enter the market when banks slightly loosen credit-qualification guidelines.
Most important, Mr. Gapen foresees job growth continuing at a healthy pace of roughly 200,000 new positions each month. “All of the factors that we think influence housing activity are supportive of further gains in starts,” he said. “The mortgage rate is the one variable that could move against starts.”