Mortgage rates stay low, and so does homebuilding

Even as the benchmark mortgage rate remains below 4 percent for the 36th week in a row, it’s still hard to find a new house to buy.

Housing starts fell in August, to an annual rate of 720,000 single-family homes, according to the U.S. Census Bureau.

That was 6 percent below the July figure of 768,000. When you look at all housing starts, including multifamily units that often become rentals, the annual rate in August was 1.142 million, down 5.8 percent from July.

Not enough construction

A lot of cities suffer from a shortage of new houses, says Lawrence Yun, chief economist for the National Association of Realtors. “Inadequate single-family home construction since the Great Recession has had a detrimental impact on the housing market by accelerating price growth and making it very difficult for prospective buyers to find an affordable home — especially young adults,” Yun says.

This week’s rates

■ The benchmark 30-year, fixed-rate mortgage fell this week to 3.62 percent from 3.64 percent, according to Bankrate’s weekly survey of large lenders. A year ago, it was 4 percent. Four weeks ago, the rate was 3.57 percent.

The mortgages in this week’s survey had an average total of 0.2 discount and origination points.

Over the past 52 weeks, the 30-year fixed has averaged 3.82 percent. This week’s rate is 0.2 percentage points lower than the 52-week average.

■ The benchmark 15-year, fixed-rate mortgage was unchanged, at 2.91 percent.

■ The benchmark 5/1 adjustable-rate mortgage fell to 3.09 percent from 3.13 percent.

■ The benchmark 30-year, fixed-rate jumbo mortgage rose to 3.63 percent from 3.62 percent.

Rates and the Fed

In Bankrate’s weekly survey, the 30-year fixed has remained below 4 percent since Jan. 20, or 36 straight weeks. The record is 56 consecutive weeks, starting in May 2012 and ending in June 2013, when mortgage rates went up abruptly after financial markets went into a tizzy over Federal Reserve monetary policy. The Fed announced that it might eventually reduce, or “taper” its bond purchases designed to keep long-term interest rates low. Investors dumped bonds, and bond yields skyrocketed in what became known as the “taper tantrum.”

The Fed’s monetary policy committee met this week, but Bankrate had collected the week’s mortgage rate data before the central bank decision. The Fed announced it would keep the overnight rate unchanged, but the case for raising the rate has strengthened.

Since 2008, the Fed has been buying mortgage-backed securities. The purchases have the effect of pushing downward on mortgage rates. But low mortgage rates haven’t been enough to stimulate homebuilding, which has been stymied by labor shortages and a lack of buildable lots.

Scarcity of new houses

The Realtors association says that, historically, one permit for a single-family home is approved for every 1.6 jobs created. By that standard, four metro areas each need more than 100,000 house permits to catch up with job growth from 2012 through 2015. Those metro areas are New York, Dallas, San Francisco and Miami.

This week’s report on new houses contained a nugget of good news, says Jonathan Smoke, chief economist for Realtor.com. The number of permits for single-family homes has gone up 8 percent this year compared with the same period last year. Permits for new single-family houses have exceeded starts for the first time this year.

“When permits are higher than starts, future starts are likely to be higher,” Smoke says. And that means more new houses will hit the market, likely right around springtime next year, the start of homebuying season.