The story appears on

Page A11

September 20, 2019

GET this page in PDF

Free for subscribers

View shopping cart

Related News

Home » Business

US housing surges to 12-year high, boosted by lower mortgage rates

US homebuilding surged to more than a 12-year high in August as both single- and multi-family housing construction accelerated, suggesting that lower mortgage rates were finally providing a boost to the struggling housing market.

The report from the Commerce Department on Wednesday also showed permits for future home construction rose to levels last seen in 2007. Housing and manufacturing have been the weak spots in the economy, which is now in its 11th year of expansion, the longest in history.

The jump in homebuilding activity last month added to strong retail sales data in suggesting the economy continues to grow moderately and is probably not flirting with a recession as has been flagged by financial markets. A year-long trade war between the United States and China has dimmed the economic outlook.

The Federal Reserve cut interest rates by another 25 basis points on Wednesday to blunt the hit on the economy from the trade tensions, but offered mixed signals on the next move. The US central bank said “economic activity has been rising at a moderate rate.” The Fed lowered borrowing costs in July for the first time since 2008.

“A prolonged period of lower mortgage rates has perhaps finally encouraged prospective homebuyers to get off the sidelines,” said John Pataky, executive vice president at TIAA Bank in Jacksonville, Florida. “I’d like to see a couple more months of data like this before I’m convinced the market’s fortunes have really changed.”

Housing starts jumped 12.3 percent to a seasonally adjusted annual rate of 1.364 million units last month, the highest level since June 2007, the government said. Data for July was revised up to show homebuilding falling to a pace of 1.215 million units, instead of decreasing at a rate of 1.191 million units as previously reported.

Economists polled by Reuters had forecast housing starts would advance to a pace of 1.250 million units in August. Building permits increased 7.7 percent to a rate of 1.419 million units in August, the highest level since May 2007.

Housing starts rose 6.6 percent on a year-on-year basis in August.

The housing market, the most sensitive sector to interest rates, had until now shown few signs of benefiting from the Fed’s monetary policy easing, which has pushed down mortgage rates from last year’s multi-year highs. Builders had blamed the lackluster performance on land and labor shortages.

A survey on Tuesday showed confidence among homebuilders rose in September, with builders reporting solid demand for homes. But builders said scarce building lots and labor remained a challenge and also noted that trade tensions, which have undercut manufacturing, were “holding back home construction in some parts of the nation.”

The 30-year fixed mortgage rate has dropped more than 130 basis points to an average of 3.56 percent, according to data from mortgage finance agency Freddie Mac.

Broad gains

Firmer demand for housing was underscored by a separate report on Wednesday from the Mortgage Bankers Association showing applications for loans to purchase a home increased for a third straight week last week.

The dollar rose marginally against a basket of currencies as investors focused on the Fed’s mixed signals on the future course of monetary policy. US Treasury prices trimmed gains and stocks on Wall Street extended losses.

August’s robust homebuilding performance raised hopes that residential investment would rebound in the third quarter after contracting for six straight quarters, the longest such stretch since the 2007-2009 recession.

The Atlanta Fed lifted its third-quarter gross domestic product estimate by one-tenth of a percentage point to a 1.9 percent annualized rate. The economy grew at a 2.0 percent rate in the April-June quarter, decelerating from the first quarter’s 3.1 percent pace.

Single-family homebuilding, which accounts for the largest share of the housing market, increased 4.4 percent to a rate of 919,000 units in August, the highest level since January.

Permits to build single-family homes vaulted 4.5 percent to a rate of 866,000 units last month, the highest since July 2018. Permits, however, continued to lag housing starts, suggesting limited scope for a strong rise in single-family homebuilding in the coming months.

Starts for the volatile multi-family housing segment soared 32.8 percent to a rate of 445,000 units in August, reversing the prior two months’ declines. Though rental inflation has slowed in recent months, economists do not expect the trend to continue as rental vacancy rates remain low.

Permits for the construction of multi-family homes increased 13.3 percent to a rate of 553,000 units last month.

Despite the surge in both starts and permits in August, housing shortages will likely persist and keep prices elevated.

Housing completions rose 2.4 percent to 1.294 million units last month. Realtors estimate that housing starts and completion rates need to be in a range of 1.5 million to 1.6 million units per month to close the inventory gap. The stock of housing under construction climbed 0.3 percent to 1.144 million units in August.

“The stock of new homes priced under US$300,000, which is what half of new homebuyers need before they can afford a purchase, continues to be low,” said Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia. “And the pace of home building remains significantly below historical averages.”


Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.

沪公网安备 31010602000204号

Email this to your friend