New Housing Starts Maintain Pace

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On Friday, the US Commerce Department announced a small piece of good economic news for pool builders. Its monthly report on new housing starts indicated December maintained the overall momentum toward recovery in US housing construction. The news is especially welcome as the strong pace indicates that rising interest rates — up a point since May of 2013 — do not appear to have slowed the comeback in housing.

According to the report, U.S. housing units were begun at an adjusted annual rate of 999,000, well above summer levels and a figure that exceeded economists' forecast for 975,000 starts in December. In the same report, November's pace was revised up to 1.11 million from the previous estimate of 1.09 million. This was the strongest rate in the last five years, but of course those were the five worst years for housing starts since 1959.

For all of 2013, construction began on an estimated 923,400 housing units, an 18 percent increase from the prior year. In 2014, builders hope to break the 1 million starts per year mark. This is still well below pre-recession levels, however. In the decade before the recession began, builders started an average of 1.7 million housing units per year.

Monthly home construction figures had trended up since the start of 2011 until the early part of last year, when interest rates rose sharply in the spring, killing momentum by suddenly making mortgages more expensive for buyers. Mortgage rates stabilized in the fall, aiding home building. In December, the Federal Reserve said it would reduce the size of bond purchases by $10 billion a month, a move widely seen as putting further upward pressure on interest rates.

The average rate on a 30-year fixed rate mortgage edged up to about 4.5 percent at the end of last month, according to Freddie Mac, up from 3.5 percent earlier in the year. 

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