The mortgage market received a double shot of good news this morning, with a jolting spike in single-family housing starts and a continued decline in the level of cash sales for new residential properties.
The U.S. Census Bureau and the U.S. Department of Housing & Urban Development (HUD) reported that single-family housing starts in July were at a rate of 782,000, a substantial 12.8 percent increase from the revised June figure of 693,000. Privately-owned housing starts in July saw a much less considerable month-over-month increase of 0.2 percent for a seasonally adjusted annual rate of 1,206,000, although the year-over-year rate saw a 10.1 percent spike.
Privately-owned housing units authorized by building permits in July were at a seasonally adjusted annual rate of 1,119,000, which is 16.3 percent below the revised June rate of 1,337,000, but is 7.5 percent above the July 2014 estimate of 1,041,000. Single-family authorizations in July were at a rate of 679,000, which is 1.9 percent below the revised June figure of 692,000.
Privately-owned housing completions in July were at a seasonally adjusted annual rate of 987,000, which is 2.4 percent above the revised June estimate of 964,000 and is 14.6 percent above the July 2014 rate of 861,000.
So, how are homeowners paying for these properties? Increasingly, fewer people are bypassing lenders in favor of cash sales. New data from CoreLogic found cash sales made up 31.9 percent of total home sales in May, down from 35.1 percent in May 2014; on a monthly measurement, May’s level was 1.7 percentage points below the April level. May marks the 29th consecutive month of declining cash sales activities, which peaked in January 2011 at 46.5 percent of total home sales; prior to the 2008 economic crash, cash sales averaged about 25 percent of total home sale activity.
The majority of cash sales in May belonged to real estate-owned (REO) sales, which registered 56.1 percent of activity, followed by resales at 31.5 percent, short sales at 30.1 percent and newly constructed homes at 14.7 percent. Florida had the largest share of any state-specific cash sales in May at 47.8 percent, followed by New York (45.8 percent), New Jersey (45.8 percent), Alabama (44.2 percent) and Michigan (38.4 percent).