June 19, 2024
Home construction sank in August amid falling mortgage rates.  cnn business


Washington, DC CNN –

US homebuilding sank in August, falling 11.3% from July levels, as mortgage rates remained high amid lingering inflation.

Housing starts, a measure of new home formation, fell to a seasonally adjusted annual rate of 1.283 million last month, well below expectations of 1.44 million, according to data released Tuesday by the Census Bureau.

This was the lowest level since June 2020.

The number of units launched was 14.8% lower than a year ago.

Single-family housing starts, which account for the majority of construction, declined 4.3% in August from the revised July figure, at a seasonally adjusted annual rate of 941,000.

After rising in July, new home starts declined in August as mortgage rates reached their peak in late 2022.

“The combination of high interest rates, high pricing and limited inventory continues to impact the housing market,” said Kelly Mangold of RCLCO Real Estate Consulting. “In many cases, purchasing your same home again at today’s mortgage rates would also be out of a typical buyer’s price range.”

Over 90% of homeowners have mortgage rates below 6% and many have rates closer to 2% or 3%. Some people are now looking to sell and buy new homes at rates higher than 7%. This has left the inventory of existing homes for sale exceptionally low.

While this is good news for the new construction residential market, it is not enough to offset the affordability factors that have impacted purchase activity over the past month, Mangold said.

“Motivated buyers can get a good deal because prices are stable and larger builders who are able to offer mortgage buydowns are able to offer buyers a far more competitive offer than is available in the resale market,” he said, The initial decline suggests builders remain cautious about what impact future increases in mortgage rates will have on the market.

Home builder confidence was low in September, according to a separate report from the National Association of Home Builders/Wells Fargo Housing Market Index released Monday.

The monthly index looks at current sales, buyer traffic and the outlook for new-construction home sales over the next six months. September’s reading was the first time in five months that the overall builder sentiment level fell below the break-even measure of 50.

But, looking to the future, builders are still requesting permits for new residential construction.

Building permits, which tracks the number of new housing units permitted, rose in August, up 6.9% from July’s revised number, to a seasonally adjusted annual rate of 1.443 million, the highest level in 10 months. .

Permits were still down 2.7% from a year earlier.

Source: amp.cnn.com

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