Housing starts came in strong for February, rising 5.2% month over month to 1.178 million units when annualized. Single-family starts were especially robust, rising 7.2%.
That said, at least a few commentators were down on permits, a useful gauge for estimating future activity. Overall, permits were down 3.1% in February. However, single-family starts were actually up 0.4%. Year over year, growth in single-family permits has been healthy, up 6.3%. This suggests that new-home activity should remain elevated heading into the spring season.
But the news on new-home activity isn’t all good. NAR data show that inventory for homes priced below $250,000 dropped 8.2% in January compared to a year earlier. When supply falls, prices usually rise. Trulia data show that starter-home buyers on average need to devote 38%, up from 32% four years ago, of income to housing costs.
While some in housing are saying a coming drop in home prices will stymie the market for a while, that same drop in housing prices will allow Millennials to enter the housing market in the long term.
Keeping you informed on events this week that may create volatility in mortgage rates.
TIME TO LOCK AND LOAD Mortgage rates have been on the rise. This has been the trend over the past 30 days. We shouldn’t be surprised. The 10-year U.S. Treasury note yields 2% these days. That’s a yield it hasn’t offered in nearly two months. As the 10-year note goes, so go mortgage rates.
The good news is that conventional 30-year fixed-rate quotes are extremely low. As long as the economy continues to grow and businesses continue to create new jobs, we don’t see rising rates derailing housing’s multi-year upward trajectory.
In addition, recent upward trends in stock and commodity prices mean that the global economy is less likely to enter a recession. That means mortgages rates could easily move higher. That’s why a month ago, traders in fed funds rate futures contracts were pricing a 30% chance of another rate hike in December. Today, they’re pricing for a 41% chance of another hike by June.