The U.S. Census Bureau reported yesterday that new residential construction (housing starts) fell by 10.6 percent in October to 529,000 annualized units compared to 592,000 annualized units a month earlier. Single-family and multi-family starts fell by 7 percent and 35 percent, respectively. Housing starts are down 31 percent compared to a year ago. Housing permits fell 4 percent to 552,000 in October from September.
The housing starts report was disappointing news for the nation's housing sector. October's 529,000 annualized pace is a far cry from the 590,000 annualized units pace established during the previous four months. It is likely that some of the decline was due to the fear that the first-time homebuyer tax credit would expire at the end of November. However, the tax credit was extended by another seven months and expanded by including move up buyers and raising income eligibility requirements. This development is expected to create an additional 500,000 home sales by mid-2010 according to Economy.com, prompting renewed activity in new residential construction.
In other housing news, the Mortgage Bankers Association released its weekly mortgage application survey yesterday. Mortgage applications to purchase homes were down 4.7 percent in the week of November 13 compared to a week earlier. Purchase application activity is down 31.2 percent since the week of October 2. Applications to refinance an existing mortgage loan were down 1.4 percent for the current week.
Applications to purchase homes comprised only 27.1 percent of total application volume, while refinancing applications accounted for the remaining 72.9 percent. The steady decline in purchase applications over the past month has caused concern among housing analysts. Again, some of the decline in mortgage applications is attributed to fear of an expiring first-time homebuyer tax credit. With an extended and expanded tax credit, more households are expected to apply for mortgage loans over the next two quarters.
The Mortgage Bankers Association also released its quarterly mortgage delinquency survey today. Mortgage delinquency rates set a new all-time record of 9.64 percent in the third quarter. There was a substantial rise in homeowners who were 90 days or more delinquent on their monthly mortgage payments. The percentage of homeowners who were 60 days and 30 days late on their monthly mortgage payments held steady in the third quarter compared to the second quarter. Foreclosures started in the third quarter remained at a high level at 1.42 percent.
Although the housing markets received disappointing news this week, most housing observers attribute most of the weakness to the fear of an expiring homebuyer tax credit. Since the tax credit was extended and expanded, the housing recovery is expected to, once again, move forward.
