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Housing starts in the United States rose in September, driven by the multifamily sector, but completions are not matching that hot pace, especially for lower end homes. With demand rising but supply in the form of completions slowing, there will be more pressure on home prices to rise, according to the latest analysis report from real estate firm CoreLogic. The implications are likely to be particularly felt at the low end of the property market due to the Federal Housing Administration’s decision in January to cut mortgage insurance premiums by 50 basis points, it points out. Overall starts are up 18% since last September, driven by multifamily, which saw strong growth of 29%, the data shows. Completions, though, the number of units actually delivered, rose by only 8% year on year, or less than half the jump in starts. Multifamily is the driver in this sector too, up 20% from September of last year. ‘The number that should give the market pause, though, is the completions on one-unit structures, both attached and detached. They are up only 3% and they are the most important segment to look at. They significantly lag the one unit structure starts number which were up 12% year on year,’ the report says. ‘Since it takes six months to deliver a house after ground breaking, completions is the actual new supply that is ready to be sold. What that means for home sales is definite upward pressure on home prices,’ it explained. The report also points out that since the FHA made its premium cut, the prices for lower end houses have jumped and the FHA is a big presence in the low end market where houses typically sold for 75% or less than the median. As of August, real prices for lower end houses have jumped 10.4% relative to a year ago. Prices for higher end homes have been up as well, but only half as high at 5.2%. The lower end prices, which had been up in a narrow range of around s7% the last half of last year, really took off starting in January. ‘The real trend to watch here is if one unit completions will rise to match what is a re-acceleration of demand on the low end. If demand for homes to buy outstrips supply, prices will inevitably rise even higher,’ the report concludes. Continue reading →