March 29, 2017

Housing Construction Edges Up

The amount of new homes being built increased 10.5% in August. Additionally, the number of building permits for homes also increased 2.0%, according to a housing report [.pdf] released today. While these stats are positive indicators, the housing sector has worsened during May, June, and July – ever since the first-time home buyer tax credit expired April 30th.

Given the bleak condition of the housing sector, the construction increases during August do not necessarily signal a turnaround of the housing sector. Although, as suggested in the past, low mortgage rates are likely to encourage buyers. Further, as buyers realize the first-time tax credit is not going to be extended, they are less likely to wait for better buying conditions. Lastly, as the chart below shows, home equity rates have gradually been recovering for the past year – indicating a housing sector that is not great, but at least it is not getting worse.

Home equity is improving, but it still does not compare well to the past.

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