US Home builder pulled less permits in June 2013 to an annually adjusted rate of 836,000 homes according to the Commerce Department‘s report. That was nearly 10 percent below May 2013 total of 928,000. Majority of the decline in building permits came for Apartments starts where they fell almost 27 percent in June compared to May.
However, permits to build single-family homes rose for 3 straight month to 624,000, the highest since May 2008. That’s an encouraging sign especially for us in San Jose, Campbell, Los Gatos and Los Altos since we are still starving for inventory. This data suggests that the housing rebound could continue but according to some local builders the availability of credit and construction loans are still an issue for them to start large projects.
Data compared to June 2012 still shows an increase of 10% for Single Family homes and 16% increase in permits for all types of building compared to 2013. According to a Jonathan Basile, an economist at Credit Suisse, “Today’s drop in starts is more a pause in an otherwise improving trend,” . However, what is unknown is the impact of rise of interest rate for borrower to their highest level in 2 years in June 2013.
The housing recovery has been instrumental in overall recovery of the economy at a critical time when job growth, manufacturing and business investment have remained anemic. Unemployment for June 2013 in California is reported at 7% which is still high since most companies are not hiring.
The question remains whether home buyers will continue shopping for homes and bidding the prices higher with the rising interest rates. If history is any judge, the bidding wars will continue since we remember the days when President Carter was in office with 8% interest rates for home mortgages. And one house we were bidding on was sold for FULL list price even with a leaky roof!!
Will you continue shopping for a home even if the rates jump to 8%??!