The Home Buyer's Korner

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February 18th, 2015

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New Home Starts for January 2015

New Home Sales

Home Builders broke ground on fewer residential construction projects in January as demand for single-family homes cooled from an almost seven-year high that had been hoped to signaling a rebound in housing.

Housing Starts declined 2 percent to a 1.07 million annual rate, following the prior month’s 1.09 million pace as stated by the Commerce Department.  Permits, which are barometers for future construction, also fell.

Construction of single-family homes dropped 6.7 percent to a 678,000 rate in January from 727,000 the previous month that was the strongest since March 2008, the Commerce Department said. Work on multi-family homes, such as townhouses and apartment buildings, climbed 7.5 percent to an annual rate of 387,000, the most since July.

Three of four regions had a decrease in starts, indicating poor weather had less of an impact, the report showed. Work began on 22.2 percent fewer houses in the Midwest, while the Northeast and West also decreased. The South showed a 6.5 percent gain.

Rising prices are seen as the primary reason first-time homebuyers aren’t entering the market, which dampers construction and that’s coupled with high student loan debt and strict credit requirements.

Home prices accelerated in much of the U.S. in the fourth quarter as low mortgage rates and improving employment prospects created demand. The median price of an existing single-family home rose from a year earlier in 86 percent of the 175 metropolitan areas measured. Twenty-four areas had price gains of 10 percent or more, up from 16 regions in the third quarter. Prices declined in 24 areas.

Borrowing costs that have been near record lows are expected to increase when the Fed raises rates from near zero. The average rate on a 30-year fixed mortgage rose to 3.69 percent in the week ended Feb. 12 from 3.59 the week before. Mortgage rates were at their lowest in November 2013 when a 30 year fixed rate was at 3.31 percent and the lowest going back to 1971.

Applications for building permits declined 0.7 percent in January to a 1.05 million pace, also reflecting a decline in applications for construction of single-family houses and were projected to advance to 1.07

Home Builder sentiment was at a four-month low in February as we received a repeat of frigid winter weather and prospective home buyers failed to visit model homes or tour new developments. The National Association of Home Builders/Wells Fargo Confidence Gauge fell to 55 from 57 the prior month. Readings greater than 50 mean more respondents report market conditions are good.

Builders are hoping that a strong labor market will help drive home sales and underpin building activity. Payrolls advanced by 257,000 in January, the biggest three-month gain in 17 years..

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