In a week when stock markets were turbulent over concerns of the global economy faltering, U.S. homebuilders stocks had the biggest gain in almost nine months. There was plenty of good news to go around, as anticipation of people leaving cold weather states for the Southwest increased.
Each drop in mortgage rates potentially boosts home sales and gives builders reason to take on more projects. Average rates on 30-year home loans fell last week to 3.97%, the lowest since June 2013, according to Freddie Mac.
For the third time this year, nationwide housing starts surpassed the million-mark, according to newly released figures from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. Total housing production in September rose 6.3% to a seasonally adjusted annual rate of 1.017 million units. Total starts rose just above 1 million for the third time in 2014.
“September’s uptick reveals that last month’s dip in production was more of an anomaly than a market reversal,” said National Association of Home Builders (NAHB) Chief Economist David Crowe. “I expect we will see a continued recovery as job creation grows and consumers gain more confidence in the housing market.”
The September housing construction report from Census Bureau and HUD rebounded from the unusually low August level and returned to the slow but steady path expected.
Single-family housing starts were up 1.1% to a seasonally adjusted annual rate of 646,000 units in August, a 3.4 % increase over second quarter. Regionally, single-family starts were up in the Midwest and West and offset by smaller declines in the Northeast and South.
While multifamily production climbed 16.7 percent to 371,000 units and finishing the third quarter at an average of 378,000 up 5% from the second quarter. Multifamily starts were up in all regions but the Midwest where the August level was unusually high.
Issuance of building permits, an indication of future construction, registered a 1.5% gain to a seasonally adjusted annual rate of 1.018 million units in September. For the senth month in 2014 above 1 million. Multifamily permits were up 4.8% for the month to an annual level of 394,000 and 399,000 for the third quarter, which is virtually the same as the second quarter.
Homebuilders extended gains after reports that the Federal Housing Finance Agency, which regulates Freddie Mac and Fannie Mae, plans new steps to encourage lending to buyers with less-than-perfect credit scores. The FHFA also is planning an effort that will allow buyers to make down payments as small as 3% of the purchase price, two people with direct knowledge of the matter said.
"We've been in a mild economic recovery for so long that a lot of the people who were foreclosed upon are going to become eligible for mortgages again late next year and into 2016," Jim Rounds with Elliott D Pollack & Company of Phoenix said.
Explosive population growth came to an end during the housing bubble and recession. "Right now we're seeing a weak economy because people are still tied to their areas and they're not able to move. ... We're going to see more population movement and that's been the problem with Arizona." Rounds said the renewed population growth will help home sales, people moving out of apartments to single-family homes and that will create more jobs in Arizona.
"We'll see an uptick in economic activity but that's if the national economy doesn't sputter. We still need the U.S. economy to keep growing to make people more confident to move when they're eligible for a new mortgage."