Recent reports indicate that as mortgage rates continue to make homeownership more affordable, home builders gained more confidence regarding current market condition, which could make purchasing a new home in 2012 a smart investment.
According to Freddie Mac's most recent Primary Mortgage Market Survey, mortgage rates have remained below 4 percent for seven-consecutive weeks, as rates hovered near all-time lows during the week ending January 19.
The survey stated that a series of mixed economic reports kept rates relatively unchanged during the week.
"Mortgage rates were nearly unchanged this holiday week in lieu of a mixed bag of economic data reports," said Freddie Mac vice president and chief economist Frank Nothaft. "On the consumer front, retail sales edged up only 0.1 percent in December, but the Reuters/University of Michigan sentiment index continued to climb in January to the highest reading since February 2011."
Meanwhile, according to the mortgage giant, the average rate for a 30-year fixed-rate mortgage during the week edged lower to 3.88 percent. Las year at this time the rate averaged 4.74 percent.
Additionally, the rate for a 15-year FRM increased to 3.17 percent. However, despite the slight increase, the rate is still below it's 2010 level when it averaged 4.05 percent.
As mortgage rates allowed an growing number potential homeowners to find more affordable closing options when trying to purchase property, the Commerce Department released a report stating the rate of new home builds declined in December by 4.1 percent.
At the end of 2011, the rate was brought to an estimated 657,000 units for the year. However, despite the month-over-month decrease, the rate was 24.9 percent higher than the 525,000 housing starts recorded during the same period in 2010.
"The fall in housing starts in December was driven by a steep decline in the often volatile multifamily sector, while starts of single-family homes actually rose slightly," analysts from Capital Economics commented on the report. "In any case, December's fall reversed only half of the rise in starts in the previous month. With demand set to improve this year, we think that homebuilding is past the low-water mark and will rise modestly in 2012."
However, despite new multi-family builds dragging down the overall rate, the report showed single-family housing starts increased by 4.4 percent in December to an annual adjusted rate of 470,000.
Meanwhile, even though less home builds began towards the end of 2011, the National Association of Home Builders reports that builder confidence has continued to increase for four-consecutive months.
The industry group indicated that the level of builder confidence rose by 4 points in January to 25 for the month. This is the highest level the Housing Market Index has reached since June 2007.
"Builder confidence has now risen four months in a row, with the latest uptick being universally represented across every index component and region," said NAHB chairman Bob Nielsen. "This good news comes on the heels of several months of gains in single-family housing starts and sales, and is yet another indication of the gradual but steady improvement that is beginning to take hold in an increasing number of housing markets nationwide – and that has been shown by our Improving Markets Index."
Regionally, the report showed that confidence increased in all four sections of the nation. In the Northeast, the index rose by 9 points to a level of 23, while the Midwest gained one point, bringing confidence to 24. In addition, the South reported a two-point increase to 27, while the West reached 21 after gaining five points.
