More new-home construction is coming, and builders are increasingly confident about the direction of the market. Housing starts in November rose 3.2% to a seasonally adjusted annual rate of 1.37 million units, the U.S. Commerce Department reported Tuesday.

Broken out, single-family home construction rose 2.4% year over year in November, while the multifamily sector, which includes apartments and condos, rose 4.9%.

In the eye of a massive housing shortage nationwide, the latest new-home numbers are a positive sign. However, they still fall drastically short of demand, says Lawrence Yun, chief economist for the National Association of REALTORS®. He says housing starts are short by 135,000 compared to the long term average—and well short of the 5 million to 6 million that is needed to fully end the housing shortage.

“More home construction appears to be on the way as we move into 2020, as reflected in the very high confidence of home builders,” Yun says. “They are clearly recognizing an improving business opportunity. Some innovation in the industry is required as construction workers are hard to obtain in the current tight job market conditions. Modular factory-produced aspects need to be considered more intently to boost productivity. Overall, more construction will mean more housing inventory to choose from for consumers. Home sales can then easily rise while taming the fast growth in home prices.”

Single-family housing starts have been posting a steady improvement since earlier this year, adds Robert Dietz, chief economist of the National Association of Home Builders. Year-to-date, single-family and multifamily starts are up by the most in the South, rising 7.4%, and by 0.9% in the Northeast. Meanwhile, starts are down 5.8% in the Midwest and 8.7% in the West.

Housing permits, a gauge for future construction, rose 1.4% in November to a 1.48 million annual rate.

The National Association of REALTORS® will be releasing its latest existing home sales report on Thursday.

A humming economy and a halt to Federal Reserve interest rate hikes—at least in the immediate future—are helping to push mortgage rates higher. With economic expansion expected to continue into the new year, the 30-year fixed-rate mortgage, which increased to an average of 3.73% this week, could see steady inclines over the long haul, Freddie Mac reports.

“With Federal Reserve policy on cruise control and the economy continuing to grow at a steady pace, mortgage rates have stabilized as the market searches for direction,” says Sam Khater, Freddie Mac’s chief economist. “The risk of an economic downturn has receded, and, combined with the very strong job market, it should lead to a slightly higher rate environment.”

Mortgage rates reached their lowest point of the year in early September, hitting 3.49%, but they’ve been inching upward since. “Often, while higher mortgage rates are deleterious, improved economic sentiment is the reason that these higher rates have not impacted mortgage demand so far,” Khater adds.

Freddie Mac reports the following national averages with mortgage rates for the week ending Dec. 12:

• 30-year fixed-rate mortgages: averaged 3.73%, with an average 0.7 point, rising from last week’s 3.68% average. Last year at this time, 30-year rates averaged 4.63%.
• 15-year fixed-rate mortgages: averaged 3.19%, with an average 0.7 point, rising from last week’s 3.14% average. A year ago, 15-year rates averaged 4.07%.
• 5-year hybrid adjustable-rate mortgages: averaged 3.36%, with an average 0.4 point, down from 3.93% last week. A year ago, 5-year ARMs averaged 4.04%.

As the economy continues its record-long expansion, the Federal Reserve voted to leave its key benchmark rate unchanged at its meeting Wednesday. Consumers buying a home or car should continue to see lower borrowing costs as a result. Even though the Fed’s key rate isn’t directly tied to mortgage rates, they do often influence them.

This marked the final Fed meeting of the year for the Federal Reserve. Officials suggested no rate changes for 2020 and projected only one increase in 2021 and one in 2022.

The Fed’s interest rates remain low by historical standards at 1.5% to 1.75% (down from 5.25% before the last recession). Fed officials adjust interest rates in helping to speed or slow economy, when necessary.

With interest rates holding steady, “this is the time to pay down debt and boost savings,” Greg McBride, chief financial analyst at Bankrate.com, told CNBC.

The average 30-year fixed-rate mortgage is substantially lower since the end of last year. Bankrate reports that it is averaging 3.9% this week, down from 4.9% a year ago. Those who purchased their house in the last year will want to consider refinancing into a lower rate, which could save them about $150 a month, McBride says.

As for the Fed, it cut its key interest rate three times this year between July and late October. But the economic outlook remains strong and they are seeing little reason to continue cutting rates.

“Our economic outlook remains a favorable one,” Jerome H. Powell, the Fed chair, said on Wednesday following the meeting. Employment and consumer spending remain strong, and recession fears from six months ago have faded. “With a strong household sector and supportive monetary and financial conditions, we expect moderate growth to continue,” Powell said. “Inflation is barely moving up, notwithstanding that unemployment is at 50-year lows and expected to remain there. We have learned that unemployment can remain at quite low levels for an extended period of time without unwanted upward pressure on inflation.”

More first-time buyers emerged on the market in the third quarter—a modest rise, but one that economists are still upbeat about.

First-time buyers purchased 591,000 homes in the third quarter, a year-over-year increase of 1%, Genworth Mortgage Insurance reports. First-time buyers comprised 39% of all buyers in the single-family market, and 55% of purchase mortgages.

A large number of millennials are beginning to reach their early 30s. The average homeownership rate is 15 percentage points higher for those aged 30–34 compared to those aged 25–29, U.S. Census Bureau data shows.

“The sharp increase in the homeownership rate from late 20s to early 30s implies that millennials are in the middle of their transition from renting to owning, which explains the higher mix of first-time home buyers in the housing market,” the Genworth report notes. “Millennials currently span the ages of 23 and 38, so their transition is only around halfway complete.”

Thirty-two states saw an uptick in first-time buyers in the third quarter. Florida saw the fastest year-over-year growth at 6% in the third quarter, followed by Texas at 3%. Other states seeing large growth in their first-time home buyer market included California, Arizona, Georgia, New Jersey, Washington, and Illinois.

“Lower interest rates and slower growth in home prices have helped improve housing affordability and drive the rebound in the first-time home buyer market,” the report notes. The 30-year fixed-rate mortgage averaged 3.66% in the third quarter for the entire market; the interest rate for first-time buyers was 4.11%–the lowest level since the fourth quarter of 2016.

Low down payment mortgages are a major source for first-time home buyers. Eighty-eight percent of purchase loans in 2018 went to first-time buyers with a 3%-5% down payment, according to the Genworth report.