Sunday, November 25, 2007

Housing Starts down slightly, but Multi-Family are up...

So, what does that mean? First, let me toss out the original story.

Daily Real Estate News | November 21, 2007
Home Starts Up, Mostly Due to Multi-Family
U.S. home builders broke ground on more apartment buildings in October, driving housing starts up 3 percent to an unexpected seasonally adjusted rate of 1.229 million, the Commerce Department reported Tuesday.

But builders trimmed permits for future building projects by 6.6 percent. They also cut back 7.3 percent on single-family homes to a seasonally adjusted annual rate of 884,000, the lowest level of single-family home building since the last recession in October of 1991.

The levels varied regionally. Home starts in the Northeast rose 8.5 percent overall, and starts of single-family homes rose 29.5 percent. Single-family starts in the Midwest were up 15.1 percent with the overall increase at 21.1 percent.

In the South, overall starts dropped 4.6 percent and single-family starts fell 19.5 percent. Starts in the West rose 5.8 percent overall but single-family home starts dropped 8.1 percent.

Source: Thomas Financial, Dennis Moore (11/20/07)
Here is the link to the story from the NAR.

Of course, I want to focus on the numbers for the South. Starts are down by 4.6%, but SFR (Single Family Residential) Starts are down by 19.5%. That tells me that MFR (Multi-Family Residential) is well up. Why would that be? Well, MFR is another way of saying rental property. So, if builders are getting more orders for rental properties, the buyers are confident that they will be able to fill those units. It also means that buyers are confident that they will be able to pay off those units with the tenants moving in to them.

I have previously mentioned that it was looking like rents were expected to increase faster than previously expected. The "Sub-Prime Mortgage Meltdown" would be the main reason. People that were on the edge of affording a home before the SPMM are out of the market now. That increases demand on rentals... until the supply catches up, the price will rise.

So, let me sum this up into a nice, neat package.
  • If you are a credit-worthy buyer, this might be a good time for you to exploit that. The market has a LOT of inventory, and deals are to be found.
  • If you aren't buying, look for rent to go up.
  • If you don't know if you are able to get credit, talk to a reputable mortgage broker. They can tell you if you are able to qualify for something, and what the terms will be.
  • Rates are still incredibly low.
I am a long way from saying that everyone needs to rush back in to the real estate market. If your credit is shaky, I would recommend you sit on the sidelines a while longer while fixing your credit and building up some cash. I would also still counsel you to talk with a mortgage broker. A good mortgage broker can tell you the real ways to increase your credit scores.

If you need any referrals to a good mortgage broker, feel free to contact me through my website.

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