Housing Starts Increase At The Fastest Rate in Over Two Years With Confidence By Home Builders Increasing To Highest Level Since June 2006

Wednesday, September 19, 2012 07:53
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Housing Starts Increase At The Fastest Rate in Over Two Years With Confidence By Home Builders Increasing To Highest Level Since June 2006

Tags: economic indicators | economy | Federal Reserve

The markets were expecting good news on the housing front today as numbers for new home construction were expected to have risen in August to the highest level in four years. Residential housing has been a bright spot in a flagging economy and the new report may bolster hopes that this may be a housing-led rebound.
 
And, in fact, the report showed single-family housing starts increased at the fastest pace in over two years, gaining 2.3% to a 750,000 annual rate.

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The increase in the annual rate was a bit less than forecast and was held back by a decline in apartment construction. The forecast was for an increase in the annual rate to 767,000.
 
Construction of single-family homes increased 5.5%, the fastest rate since April of 2010. Permits increased .2% to a rate of 512,000, the fastest rate since March of 2010.
 
Borrowing costs and mortgage rates are still favorable, leading forecasters to say that the housing market has plenty of room on the upside.
 
Confidence at home construction companies is the highest in over six years. The National Association of Homebuilders/Wells Fargo confidence index rose to 40 in September from a reading of 37 in August. This is the highest reading since June of 2006.
 
Pent-up demand, favorable interest rates, and depressed prices are responsible for the improvement.
 
Many markets have limited supply, offering sellers some pricing power. But distressed houses could still increase inventories and keep prices low, preventing homeowners from moving.
 
The Fed targeted the housing industry in its third quantitative easing (QE3) by purchasing mortgage bonds and announcing it would do so on an unlimited basis to boost economic growth and reduce the unemployment rate.
 
Because of those factors the housing market may remain attractive for some time, at least through 2015, the new time target cited by the Fed for keeping interest rates low.

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