Mixed Signals... Housing Start Up while Permits Down?

U.S. Census Bureau and U.S. Department of Housing and Urban Development announced today that new-home construction gained and is at a 5 month high in August while building permits slowed.

Housing starts is when new home builder actually break-ground for the new homes while the permits is the early stage of preparation for building homes and a good indicator of the future starts. Here are some of the facts:

• Single-family housing starts in August 2004 were at a rate of 1.67 million, up 0.4 percent above the July figure of 1.66 million.
  
• Privately owned housing starts in August rose 0.6 percent in August from the previous month, registering a seasonally adjusted annual rate of 2 million units. August 2004's pace is 9 percent above last years rate of 1.83 million units.
  
• Privately owned housing completions in August were at a seasonally adjusted annual rate of 1.89 million units, up 1.6 percent above the revised July estimate of 1.87 million and up 20.3 percent above the August 2003 rate of 1.58 million.
  
• Single-family housing completions in August 2004 were at a rate of 1.53 million, 0.4 percent above the July figure of 1.52 million.

Now for the mixed signals of the building permits, which may mean builders are getting a little more conservative and lacking some confidence in the market even with these low mortgage rates.

• Privately owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 1.95 million units, a drop of 5.5 percent below the revised July rate of 2.06 million and 0.6 percent below the August 2003 estimate of 1.96 million.
  
• Single-family authorizations in August were at a rate of 1.54 million, down 3 percent from the July figure of 1.59 million.

Mortgage rates are only .5% off last years 48 year lows. As the bond market stays below the 4.16% new ceiling we may see a slight decrease in mortgage rates as the market looks for a new floor.

Today, Greenspan and the Fed should increase the prime rate by a quarter percent pushing up mortgage rates on some adjustable rate mortgages such as home equity lines of credit but these short term interest rates are still are historic lows.

Thanks for Reading.

Jessie J. Beaudoin