Build it and they will come. That's what someone has been whispering in the ears of homebuilders, and they've listened. The Commerce Department today announced that builders broke ground on new houses in September at an annualized rate of 1.843 million. That's the highest number in 16 years, and the percentage increase over August's numbers (13.3%) is the biggest gain in seven years. The number of single-family homes being built rose to a 24-year high.
The No. 1 reason for the surge in new construction: low mortgage rates. The average rate on a 30-year mortgage in September was 6.09%, and dipped below 6%. These are the lowest rates since Freddie Mac began tracking mortgages in 1971.
But don't hope to see rates drop that low in the near future. Today, Freddie Mac announced rates on a 30-year mortgage jumped to 6.15%, an increase of 17 basis points in one week. The rates on a 15-year mortgage saw a bigger jump, from 5.34% to 5.56%. Bankrate.com announced an even higher rate for the 30-year fixed mortgage, 6.23%, based on its survey of mortgage providers.
Blame the enlivened stock market. As investors moved money out of bonds and into equities, bond prices fell, driving up yields.
Will rates continue rising, thus pouring water on the hot housing market? Most experts believe rates will be higher a year from now, though at least one sees rates approaching 5%. We do know this much: If you haven't refinanced your mortgage, or you've been considering a home-equity loan (for worthwhile expenses, not luxuries or depreciating assets), now is the time to see which rates are available. Visit our Home Center for more information.