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New homebuilding soars

By Judy Martel · Bankrate.com
Thursday, September 5, 2013
Posted: 12 pm ET

New-home construction spending rose in July to its highest level since September 2008, signaling a confidence in the housing recovery that -- for the time being -- defies increasing mortgage rates.

Remodel-for-less-with-reclaimed-materials-1-intro-lgSpending on residential construction increased 0.6 percent to a seasonally adjusted annual rate of $334.58 billion, according to the Commerce Department. Spending overall, including commercial and public construction, also rose 0.6 percent -- the highest level since June 2009.

For the 12 months ending in July, construction spending increased 5.2 percent.

Could rising rates deflate confidence?

Consumer confidence in the housing recovery is boosting spending. But some analysts worry that if interest rates continue to rise, the recovery will stall because homes will become less affordable. So far, rates are still near historic lows but steadily increasing. The benchmark 30-year fixed-rate mortgage rose to 4.72 percent from 4.62 percent last week, according to the Bankrate.com national survey of large lenders. A year ago, the rate was 3.79 percent.

The news on home sales in July was mixed. Sales of existing homes rose 6.5 percent, while purchases of new homes dropped by 13.4 percent. The pace of existing home sales is considered the more important number to watch because it comprises a much larger share of the market.

Keep up with your wealth and mortgages, and follow me on Twitter @JudyMartel.

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5 Comments
cin
September 09, 2013 at 12:31 pm

I recently saw on CNBC a segment on various homebuilders(Toll, Lennar) stating that their stocks are tumbling. The NASDAQ says it all. Why is this story the polar opposite?

joiseygrrl
September 09, 2013 at 9:59 am

In my area of Atl metro, new homes are on the rise because investors are scooping up all decent existing inventory with all cash deals. If buyers like me are tired of the bidding wars and are working with time constraints - then new construction is the way to go.

CoDee
September 07, 2013 at 3:42 am

Buyers are primarily seeking existing properties because prices are WAAAAAAYYYYYY to high on newer properties! As long as such exorbitant prices continue then this will set the trend for the next 5-10, and maybe 15 yrs.! People are not stupid! They will either hold out or just seek 'existing' properties that can be rehabbed. They would rather stay below their 'home purchase' budgets and pay for repairs -- then -- buy a new home that still requires some work to be done as most new homes do require such. Frankly, I am not surprised to see many buyers on shows like 'House Hunters' and 'Property Virgins' buying only 'existing' properties and rehabbing them or moving out of the U.S. entirely becoming ex-pat's. The mortgage industry should get smart and stop bilking its customers and frightening off potential customers.

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