Housing Construction Up; Is Now the Time to Buy?

With prospects for the housing market looking up, the construction companies are responding. According to the Commerce Department, the construction of new houses and apartment units rose 2.8% last month to a seasonally adjusted annual rate of 519,000 units, exceeding the expectations of economists who had been examining the market. Applications for building permits decreased during the month of January, but only after two months of solid gains; overall the seasonally adjusted annual rate was 17% higher than the same time during the previous year. The trend was mirrored nationally and regionally.

This increase in construction is expected to have a significant impact on the housing market. As homebuyers tend to prefer new homes over refurbished homes, an increase of housing units will increase competition between these two markets and drive up prices.  Lumber prices are increasing due to one of the major lumber mill suppliers that shut down a facility in Canada, and this cost is estimated to increase new construction prices an estimated $1800 per home.   Already in several markets the housing prices on existing homes are increasing. Housing construction forerunner D.R. Horton is raising prices $5,000 across the board in the Dallas Fort Worth metroplex..

With these positive if tentative signs of recovery, buyers and sellers alike may begin to wonder: is now the time for trade? We are not quite out of the memory of the recession yet; consumer preferences for new housing are trending towards multi-family units that save money, if the rates are any indication: the number of housing construction has increased by 9% for multi-unit buildings and only 1.5% for single-family units.

In addition, there are a lot of factors in assessing the state of the housing market: the number and rate of foreclosures, the mortgage rate, and even the state of the local economy and the unemployment rate. Most signs, however, are positive. The S&P Case-Shiller reports that while housing prices are down 3% around the country this year, the Dallas-Fort Worth housing market has showed moderate gains, in part due to a strong economy driven by the energy market. Mortgage rates are expected to rise this year too, up a full percentage point by some estimations. This will surely slow the growth of the housing market—however, it also makes this early 2010 period a good time to buy a house, especially with the $8,000 federal tax credit extension expiring at the end of April.