Housing Starts Soar as Market Recovery Fuels Fed Tapering

Housing Starts Soar as Data Raises Fed Tapering ProspectGround-breaking on U.S. homes soared to their highest level in nearly six years in November, another indication that the housing market recovery is a factor in the Federal Reserve’s decision announced today to start tapering its bond purchases.
Fed policy makers said Wednesday that their $85 billion monthly bond-buying will be reduced to $75 billion starting in January.
The move will likely push mortgage rates higher, although anticipation of the taper has already been factored into current rates.
Mortgage bankers said today that the average contract interest rate for 30-year fixed-rate loans, with conforming loan balances ($417,000 or less), increased last week to 4.62 percent, the highest level since September 2013, from 4.61 percent the previous week.
Meanwhile, housing starts soared 22.7 percent in November, the biggest jump since January 1990, to a seasonally adjusted annual rate of 1.09 million units, the U.S. Commerce Department reported Wednesday.
That’s the highest level since February 2008.
The data was released as Fed officials met for a second day. The housing market had slowed in recent months, but newer data reflects an accelerated pace.
According to the Commerce Report, permits for new housing were also over 1 million for the third month in 2013. The November level was down 3.1 percent from a peak of 1,039,000 in October, which was a five year high.
Single-family permits were up 2.1% to 634,000, the highest since April 2008 and multifamily permits were down 10.8% to 373,000 have reaching a six and a half year high in October.
“The bounce back in starts comes as home buyers reenter the market from the uncertainty caused by a spike in mortgage rates and the government shut down and confusion in October,” said the National Association of Home Builders (NAHB) in a statement.
Confidence among home builders improved four points to a reading of 58 this month. This gain reflected improvement in all three index components – current sales conditions, sales expectations and traffic of prospective buyers. A reading above 50 indicates that more builders hold a positive outlook on the market, versus a negative one.
“The recent spike in mortgage interest rates has not deterred consumers as rates are still near historically low levels,” said NAHB Chief Economist David Crowe.

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