New Construction – Housing Starts
The Census Bureau reported that housing starts were up for the month of May to a seasonally adjusted annual rate of 560,000. This represents a 3.5% increase from April but is still 3.4% below May 2010’s pace of 580,000.
New Construction – Building Permits
Building permits were also up in May 8.7% higher than April to a seasonally adjusted annual rate of 612,000. Building permits were also up year-over-year by 5.2%. Single-family permits were up 2.5% in May over April to a rate of 405,000.
New Construction – Housing Completions
Completed homes inched up 0.4% in May to a seasonally-adjusted annual rate of 544,000 over April, but are off 22.5% from last May’s 702,000.
Permits are the furthers leading indicator of the group and this projects a better finish to home building in 2011 and a better start to 2012. Builders are still crippled from a financing perspective, finding it very difficult to get loans to start building again.
On the contrary, some communities are doing very well. Here’s a list of the top 10 selling communities in the US:
Interest Rates Stabilize
Interest rates found footing this week. Freddie Mac reported the 30-year fixed rate rose just 0.1% to 4.50% for the week ending June 16th,2011. A year ago the 30-year fixed averaged 4.75%. The 15-year fixed rate eased 0.1% to 3.67%. Last year at this time the 15-year fixed averaged 4.20%.
The main reason interest rates were mixed this week was inflation reports that came in near consensus estimates. Also with the European debt crisis closer to another bailout, markets seemed to be more stable this week. Investors seem hopeful that Greece, Portugal, Ireland, and other nations with sovereign debt crises will be resolved. This attention will focus on our own nation and we’ll to deal with the higher cost of borrowing. That coupled with inflationary pressures will cause rates to rise. In the meantime, investors should take advantage of these low rates.
Builder Confidence: Gutter
The National Association of Home Builders released its Housing Market Index which scores builder confidence. The index showed a steep decline in builder confidence for the month of June. The level now a 13, down from a 16 in May, is the lowest reading since September 2010.
Not only to do builders now have to deal with difficult financing conditions and falling home prices, they now have rising building costs as demand from foreign markets pushes material costs higher. People shopping for new homes are having to deal with difficulty in selling their own properties in order to move into a new home.
As you’ll see from this chart (courtesy Bill McBride over at Calculated Risk), the relationship between builder confidence and housing starts:
Conditions remain week in the housing market with lower home prices, weak home building prospects, and low confidence. On the positive side, the overall on and off market inventories should continue absorbing, though I imagine we’ll see listings rise on the coming week’s Existing Home Sales Report. Low interest rates are providing some relief for those who can qualify for mortgages to either refinance and free up cash flow, or those who are able to relocate.
Investors who have the ability to buy are doing so as they still represent 20% of the market. I’m now seeing a big wave of foreign buyers coming into the market buying for yield and potential upside as they see the US market near a bottom.