The Mortgage Minute Blog - Peter Grimm

Sometimes, headlines for housing can be misleading and this week gave us a terrific example.

On Wednesday, the Commerce Department released its Housing Starts data for January 2010. The data showed starts at a 6-month high.

A “Housing Start” is a privately-owned home on which construction has started.

Headlines on the Housing Starts story included:

• U.S. Housing Starts Hit 6-Month High (Reuters)
• U.S. Economy Receives Home Building Boost (Shepparton)
• Housing Starts Post Sharp Rebound (ABC)

Based to the headlines, the housing market looks poised for rapid growth through the Spring Market.

The real story, though, is that although Housing Starts increased by close to 3 percent last month, the growth is mostly attributed to buildings with 5 or more units.  This includes apartments and condominiums, a sector of the housing market that’s notoriously volatile.

If we isolate Housing Starts for single family homes only, we see that starts grew by just 7,000 units last month and have failed to break a range since June 2009.  January’s tally is slightly below the 8-month average.

Perhaps more interesting than the Housing Starts, is the Commerce Department’s accompanying data for Housing Permits. After a 5-month plateau that ended in November, Housing Permits posted multi-year highs for the second straight month.

According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.

One reason permits are up is that home builders want to capitalize on the federal homebuyer tax credit’s dwindling time frame.  Sales are expected to spike in March and April and more homes will come online to deal with that demand.  Home buyers in Connecticut should shop carefully, but with an eye on the clock.

As the tax credit’s April 30, 2010 deadline approaches, competition for homes may be fierce.

A “Housing Start” is a privately-owned property on which construction of a home has started. It’s an important gauge of housing health because it tracks new housing inventory nationwide.

In December 2009, starts fell by nearly 7 percent.

The news is mildly disappointing but not too bad. One of the likely causes for the Housing Starts drop is December’s rough weather conditions. It’s tough to break ground when Mother Nature won’t cooperate and last month was especially stormy in many parts of the country.

Some good news is that for the second straight month, Housing Permits exploded. 

A housing permit is a certificate from local governments that authorizes construction. After posting a 7 percent gain in November, permits rose by another 8 percent in December.

It’s a signal that housing may be in recovery despite the falling number of actual starts. More permits mean that builders plan to bring more homes on the market for what’s expected to be a very busy spring home shopping season.

According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.  Therefore, Housing Starts should start rising soon.

For home buyers, the news couldn’t be better. 

With more homes coming on the market, competition among home sellers should increase, and that will suppress any rise in home prices in most markets.