Archive for Housing Starts
Building Permits Surge In December, Signals A Strong Spring Lake Geneva Housing Market
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Each month, in conjunction with the Department of Housing and Urban Development, the Census Bureau releases its New Residential Construction report. The report is comprised of several sections, one of which counts the number of homes that have “broken ground” in Wisconsin and nationwide.
They’re called “Housing Starts” and, by most measures, they faded quickly as 2010 came to a close.
According to the Census Bureau’s report, Housing Starts of single-family homes fell to 417,000 units on a seasonally-adjusted, annual basis. The figure marks a 9 percent drop-off from November, and is the lowest reading since May 2009.
Not surprisingly, the press went bearish on housing post-release:
- U.S. Home Building Stuck Near 50-Year Lows (AFP)
- Housing Starts Slowed Sharply In December (New York Times)
- Housing Starts Fall In December To One-Year Low (Bloomberg)
Despite being truthful, these headlines are somewhat misleading. They each ignore a key element of December’s New Residential Construction report — Building Permits. Building Permits rose 6 percent to an 8-month high last month.
A building permit is a local-government certification that authorizes home construction.
Permits are a precursor to Housing Starts with 82% of homes starting construction within 60 days of permit-issuance. More permits in December, therefore, should lead to more Housing Starts in January and February.
It’s unclear whether permits were up because the economy was improving, or because builders raced to beat new building code for 2011. Regardless, expect additional “new home” supplies this spring which would ordinarily help home prices drop if not for the normal surge in spring buyers to gobble those new homes up.
Look for Lake Geneva real estate home prices to stay flat, but with rising Lake Geneva mortgage rates contributing to higher costs of homeownership overall.
Lake Geneva Housing Starts Rise In November, But With A High Margin Of Error
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The number of single-family Housing Starts increased in November, adding 30,000 units as compared to October.
The Census Bureau defines a “housing start” as a home on which construction has started.
November’s starts represents a 7 percent increase from the month prior. However, if you see the Housing Starts story online or in the papers, you’ll notice that the press is calling the market gain at 4 percent.
So which result is right? The answer is both.
The government’s monthly Housing Starts data is published as a composite report; lumping activity among 3 separate housing types into a single, group reading.
The 3 housing types are:
- Single-family homes (i.e. 1-unit)
- Multi-unit homes (i.e. 2-4 units)
- Apartments (5 units or more)
The group reading is a fair description of the market and it’s easy-to-understand. As a result, it’s what the press tends to report. However, for Lake Geneva home buyers, it’s the single-family category that’s most relevant.
The reason why single-family homes accounted for 84% of November’s Housing Starts is because that’s the type of home that most buyers buy. Few purchase 2-4 unit properties, and even fewer buy entire apartment complexes.
That said, it’s possible that November’s Housing Starts data is wrong. Within the press release, the government placed an asterisk next to the data, indicating that the figure’s margin of error exceeds its actual measurement.
Against a 7 percent gain, the reported margin of error is 13.5%. There is no statistical evidence, therefore, to prove the actual change was different from zero.
If Housing Starts did fall in November, it will help to reduce the Lake Geneva real estate housing inventory, which will, in turn, help keep home prices high. For home sellers, this could mean good news. Fewer homes for sale increase competition among buyers.
Newspaper stories can be misleading sometimes — especially with respect to Lake Geneva real estate. We saw a terrific example of this Wednesday.
A “Housing Start” is a privately-owned home on which construction has started and, according to the Commerce Department’s October 2010 data, Housing Starts data dropped by nearly 12 percent as compared to September.
The media jumped on the story, and its negative implications for the housing market overall.
A sampling of the headlines included:
- Housing Starts Plunge: Market’s ‘Pulse is Faint’ (WSJ)
- Housing Starts Tumble (Reuters)
- Housing Starts Sink 11.7 Percent In October (NPR)
Although factually correct, the headlines are misleading. Yes, Housing Starts fell sharply in October, but if we strip out the volatile “5 or more units” portion of the data — a grouping that includes apartment buildings and condominiums — Housing Starts only fell 1 percent.
That’s a big difference. Especially because most new construction buyers of Lake Geneva real estate and around the country don’t purchase entire condo buildings. They buy single-family residences.
As an illustration, 84% of October’s Housing Starts were single-family homes. The remaining starts were multi-units.
This is why the headlines don’t tell the whole story. The market that matters most to buyers — the single-family market — gets completely glossed over. The Housing Starts reading wasn’t nearly as awful as the papers would have you believe. Furthermore, it’s never mentioned that single-family Housing Permits climbed 1 percent last month, either.
According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance. Therefore, we can expect December’s starts to be higher, too.
Lake Geneva Real Estate Single-Family Housing Starts Fade In July
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Sometimes, you need to look deeper than the headlines to get the news that matters. This basic truth’s latest example comes from the July Housing Starts data, as published by the U.S. Census Bureau.
According to the newspapers, Housing Starts improved last month:
- US Housing Starts Make Modest Rebound (FT)
- Housing Starts Rise Slightly (MoneyWatch)
- Housing Starts Tick Higher In July (MarketWatch)
However, these stories are speaking in terms of all housing starts — not just the single-family ones. This is a major point of difference for home buyers of Lake Geneva real estate because most people don’t buy the multi-unit homes and apartment buildings that’s also a part of the Housing Starts data.
The overwhelming majority of buyers buy single-family homes and in July, as in the previous 3 months, the number of single-family housing starts fell.
In fact, single-family housing starts are down by nearly 25 percent since April and are now at their lowest levels since May 2009.
This is a much different message from the headlines above.
It’s not surprising that single-family housing starts are down; builder confidence is down as well and the two metrics tend to trend in the same direction.
Furthermore, building permits for single-family homes fell in July, too.
As a home buyer, the drop in Housing Starts should help reduce housing inventory in the months ahead. This may lead home prices to rise because home values are based on supply and demand. For home sellers, falling starts should help reduce competition for buyers.
Each real estate market is unique and supply levels will vary from ZIP code to ZIP code. For up-to-the-minute inventory levels, make sure to talk with your real estate agent. If you don’t have a great Lake Geneva real estate agent than contact me so I can recommend one to you.
Single-family housing starts plummeted to a one-year low in May, just 30 days after soaring to a 20-month high. It’s no wonder home builders are confused.
Against a revised April figure, Housing Starts fell 97,000 units in May, a figure representing almost one-fifth of the total market size.
It’s the worst showing for Housing Starts since May 2009, a surprise to builders and economists alike.
Furthermore, single-family Building Permits plunged in May, too — down 10 percent from April. A permit is a certification from local government that authorizes home construction.
Housing permits are a precursor to Housing Starts with 82% of homes starting construction within 60 days of permit-issuance. Fewer permits, therefore, directly reduces the number of new homes coming to market in the coming months.
For home buyers of Lake Geneva real estate , this should create a sense of urgency.
Home prices are based on supply and demand and supply appears to be falling about the same time that economists predict a surge in home demand. It could spell rising home prices and a complete loss of negotiation power with home sellers.
For now, though, home affordability remains high with properties cheap and mortgage rates near all-time lows. If you plan to buy a home later this year, the May 2010 Housing Starts data may be a reason to move up your timeframe a bit.
Is Now The Perfect Time To Buy Lake Geneva Real Estate?
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Single-family Housing Starts rose by 55,000 last month, suggesting ample housing stock from which Lake Geneva real estate shoppers can choose this summer.
The report is a slightly larger read than what economists had expected.
Furthermore, for the first time since June 2009, Housing Starts appears to have broken away from its half-million unit plateau. 593,000 new homes were started in April.
Ordinarily, both Wall Street and Main Street would celebrate a strong housing sector report like this, but the Department of Commerce’s press release also held two cautionary notes.
The first point of caution is a mathematical one. Although single-family starts increased by 10.2 percent, the survey had a Margin of Error of 10.7 percent. This means that Housing Starts may have fallen by 0.5 percent and the report is statistically worthless.
The second point of caution is tied to Building Permits, a complementary data point in the same Department of Commerce report. In April, Building Permits fell by almost 11 percent with a tiny Margin of Error of less than 2%. This tells us that builders are pulling back — a sign of low housing market confidence
According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance. Housing Starts, therefore, should ease though June and July.
Home prices are based on housing’s supply and demand. For the next few months, supply should elevate, helping prices remain suppressed, after which, supply should dwindle.
The best time to buy Lake Geneva real estate, therefore, may be now. As the summer months come to close, we may find that buyers vastly outweigh sellers.
After a strong March showing and a surprise upward-revision for February, Housing Starts are, once again, trending better.
It’s yet another signal that Lake Geneva real estate and housing nationwide is stabilized.
A Housing Start is a new home on which construction has started and, over the last 6 months, home builders are averaging one half-million starts per month.
This marks the highest 6-month average since 2008 and a reading one-fifth percent better from 12 months ago. Revisions to prior data have all been higher, too.
Even more interesting, though, is that the number of newly-issued building permits is exploding. Permits were up more than 5 percent last month and have climbed back to the levels of late-2008.
Housing permits are an important data point in housing because permits are precursors to actual housing starts. According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.
Therefore, because March’s housing permits increased, we should expect Housing Starts to continue to rise into the early months of summer.
This, too, reflects well on Lake Geneva real estate housing because the federal home buyer tax credit won’t be in existence this summer. The simple fact the homes are being built now shows that housing is likely to expand even after the tax credit expires.
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Asst Vice President
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Delavan, Wisconsin, 53115 US |
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Lender, Lake Geneva Real Estate
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Single-family Housing Starts idled last month, dropping just 3,000 units from the month prior, or 0.2%.
According to the Commerce Department’s report, February marked the 8th straight month in which Housing Starts straddled the half-million marker, dating back to June 2009. The Lake Geneva real estate market has seen very similar statistics.
This is a different slant on the Housing Starts story as told by the press.
Most publications are reporting that Housing Starts fell 5.9 percent in February. Technically, this is true. Housing Starts did fall 5.9 percent last month. However, the Housing Starts data is comprised of three parts:
- Single-Family Housing Starts
- 2-4 Unit Housing Starts
- “Apartment Building” Housing Starts (i.e. 5 or more units)
The press tends to lump all 3 together but that’s not relevant for everyday homeowners and buyers.
2-4 unit homes, and apartments and condos are a different housing class as compared to single-family homes and are notoriously volatile, too. Single-family starts are more steady and better reflect the country’s housing stock.
Single-family housing starts are up 32 percent over the last 12 months.
Meanwhile, the pace of new buyers has not kept up with the pace of new housing stock. Therefore, because home prices are based on supply-and-demand, the price for a newly-built home was down, on average, 7 percent nationwide in January.
With the federal home buyer tax credit expiring soon, home buyers looking for Lake Geneva real estate will likely create new demand for homes. And with Housing Starts holding steady near 500,000, that should push prices higher through the spring months.
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Asst Vice President
1221 South Shore Drive
Delavan, Wisconsin, 53115 US |
Work: 262-728-6209
Mobile: 262-745-5055
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Lender, Lake Geneva Real Estate
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