Housing starts rise to best level seen in over five years

Housing starts and Superstorm Sandy

According to the U.S. Commerce Department, housing starts increased 3.6 percent in October to an annual pace of 894,000, the best rate seen in more than five years.

The Commerce Department said that Superstorm Sandy had a “minimal” effect on residential construction for the month, and the storm is expected to boost new building permits in the coming months. Historic low mortgage rates are said to be the fuel for the improved starts, with Freddie Mac reporting the average rate on a 30-year loan falling to 3.34 percent, hovering around rates seen in the Eisenhower Administration.

Sales, starts, and confidence levels

At its last reading, new home sales rose to a point that builders were calling the bottom of the market, and with new data coming out in the coming days, even more improvement is expected.

With improving sales and starts, builder confidence has risen for the seventh consecutive month with more builders feeling optimistic about current sales and sales expectations with no recent changes in sentiment regarding consumer traffic.

NAHB Chief Economist, Dr. David Crowe said, “At this point, difficult appraisals and tight lending conditions for builders and buyers remain limiting factors for the burgeoning housing recovery, along with shortages of buildable lots that have begun popping up in certain markets.”

Calling it a comeback?

Although data has been positive for the sector, and builder confidence is on the rise, there are still more builders that are pessimistic about the coming months than are optimistic, as lending remains tight (unreasonably so, some builders claim), competition with reduced price foreclosure and short sale listings, new home sales are improving, yet are still not at pre-recession levels, and calling it a comeback may be premature. Positive signs do indicate, however, that the new home sector is indeed finding its bottom which is the first step of a recovery.