December saw America’s Best Month for New Home Construction in 13 years

Mortgage rates fell to multi-year lows over the summer last year. Although they have rebounded some, rates are still favorable for buyers. This has inspired an upswing in home buying activity toward the end of 2019. But housing supply still lags demand, and affordability remains a problem for parts of the population.  Still, mortgage applications for new home purchases jumped 5% between November and December, and a whopping 38.7% year-over-year, according to the Mortgage Bankers Association. In the week of January 10, the average interest rate for a 30-year fixed rate mortgage for a balance of $510,400 or less was 3.87% — a four-month low.

But before you start singing “Happy Days Are Here Again,” some analysts remain skeptical that America’s housing market is ready to boom.  Although “all the ingredients are there for a strengthening of the housing construction market, it’s just that today’s results look over-the-top,” cautioned Chris Rupkey, chief financial economist at MUFG.  One reason to take Friday’s good data with a grain of salt is that building permits fell 3.9% in December.  “Housing starts have been below housing permits lately so today’s figures look suspicious, meaning the good news cannot last,” Rupkey said.