Homeownership's Perfect Storm: Low Mortgage Rates, High Housing Starts

Housing affordability could become more prominent in the next few months, thanks in part to new home construction.


U.S. News & World Report | July 19, 2016       Home construction bounced back in June after an unimpressive May, potentially setting the stage for more moderate home price growth, with mortgage rates already hovering near historic lows.

Housing starts jumped 4.8 percent last month, according to a report published Tuesday by the Census Bureau. That's the best rate of home construction improvement since February and well ahead of analysts' more modest expectations.

The number of building permits issued in June, likewise, ticked up 1.5 percent over the month, while the number of housing completions skyrocketed 12.3 percent. These finished projects showed improvement in all four of the country's major geographic regions, though the Northeast led the charge with an 89.7 percent spike, spurred mostly by multifamily units and apartment buildings.

All told, June was a welcome step in the right direction following what has thus far been a lackluster year in the world of home construction. Despite the monthly improvement, housing starts are still down 2 percent over the year. And building permits are down a whopping 13.6 percent from June 2015. 

"June's data release shows monthly starts are still about 20 percent below historical averages," Ralph McLaughlin, chief economist at real estate hub Trulia, said in a statement Tuesday. "Nationally, new housing supply relative to demand is about 15 percent below the historical average."

All of this means fewer job opportunities for domestic construction workers. Such payrolls were unchanged in the month of June, according to the Bureau of Labor Statistics. But construction employment fell in April and May, which hadn't happened in consecutive months since mid-2012.  Read more here.