Housing starts fall on apartment slide

U.S. builders broke ground on fewer homes last month, led by a drop in apartment construction.

The number of new housing starts declined 2.6 percent in January to a seasonally adjusted annual rate of 1.25 million, the Commerce Department said Thursday.

The drop came after a much larger gain the previous month. Single-family housing starts rose 1.9 percent, while apartment building dropped 7.9 percent.

Even with the decline, new home construction has increased 10.5 percent in the past year. That gain has been fueled by rising demand for homes as more Americans are looking to buy. Many economists saw Thursday’s report as a sign that higher mortgage rates aren’t yet dragging down the housing market.

Many potential buyers are frustrated by a lack of available properties. The supply of existing homes fell in December to its lowest level since 1999. That has pushed up prices as buyers have had to bid against each other.

Home builders have responded by ramping up construction, but the increases haven’t been fast enough to relieve supply shortages.

In a positive sign, building permits, a gauge of future construction, rose 4.6 percent last month, led by a big gain in apartment permits. Applications for single-family building permits fell.

“The big uptick in permits should be good news for inventory-constrained homebuyers, as permits eventually become starts, which in turn become new homes for sale,” said Ralph McLaughlin, chief economist for real estate data provider Trulia. “As a result, we shouldn’t be surprised to see a strong uptick in starts in mid-2017.”

Rising prices, a tight supply of homes and higher mortgage rates combined to slow sales of existing homes in December, when they fell 2.8 percent.

Still, home construction has largely recovered from the housing bust that began a decade ago. In 2016, builders started work on the most new homes since 2007.

Higher mortgage rates could exert a bigger drag on sales in the coming months.

The average fixed-rate 30-year mortgage eased to 4.15 percent this week, according to mortgage buyer Freddie Mac, down slightly from 4.17 percent the previous week. That is well above the average rate of 3.65 percent for all of 2016. apartments over homeownership in the coming months.”

Last month, the board reported that sales and prices in Central Texas reached record annual highs for 2016, for the sixth year in a row. Housing market experts are forecasting a strong market for 2017, though perhaps not as robust as last year.

Austin real estate broker Brad Pauly said the year is off to a strong start.

“The last quarter of 2016 was a little slower after a fast pace through most of the year,” said Pauly, owner of Pauly Presley Realty. “However, after about a week into 2017, things took off again. Continuing with the same trend from the last few years, if a property hits the market priced right, it’s usually pending within days.”

Aaron Nann, a real estate advisor with Realty Austin, said over the past six to 12 months he has seen many more local buyers who purchased a home five to seven years ago return to the market.

“By now many have good equity from their purchase, their salaries may be higher and the feeling of future interest rates possibly rising is motivation to move up,” Nann said. “This combined with population growth has brought a shortage of homes under $500,000.”

Andrew Vallejo, a local real estate agent, said some of his buyers are altering their searches, either looking a little farther outside of central Austin into areas like Cedar Park, or adjusting their price points to allow for a greater variety of options.

“One of my recent homebuying customers raised his price point by $100,000, and we immediately found the perfect home,” said Vallejo, with Redfin, a national real estate brokerage. “Eventually going toward the higher end of your price spectrum can make all the difference in the homes you have to choose from.” Sales were up 7 percent over the prior January. The median sales price increased 9.8 percent year-over-year.

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“At the same time, the homes that aren’t selling quickly are sitting on the market for longer than we’ve seen since January 2015,” according to Redfin data, Vallejo said. “With Austin home prices rising so rapidly over the last few years, some sellers got a little too excited and overpriced their homes last year. You can still get top dollar for a home in Austin, but it needs to have a lot going for it — charm, location, amenities, walkability, those sorts of things. Otherwise, buyers won’t be interested.”