Builders are Making Lemonade With the Lemons

Headlines Can Be Misleading at Times

This week gave us a terrific example of the common theme.

On Wednesday, the US 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.

Some of the 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 ready for rapid growth through the Spring Market.

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

Home Sales Expected to Spike in March & April

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

Even more interesting (lots of interesting, right?!) than the Housing Starts, is the Commerce Department’s accompanying data for Housing Permits. After a five-month plateau that ended in November, Housing Permits posted multi-year highs for the second straight month.

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

In my opinion, one major reason permits are up is that home builders want to capitalize on the federal homebuyer tax credit’s short time frame. Sales are expected to spike in March and April and more homes will become available to deal with that demand. Home buyers in Urbandale 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.

If you’re considering making a home purchase and need a loan, I’d be happy to throw my hat in the race. I respond to email very quickly, and, our rates are really good.