According to the report published this Wednesday by the Census Bureau, housing construction in the United States fell by 8% for the month of June, housing starts fell to an adjusted annualized rate of 1.43 million.
The figures presented show that there was a reduction in units compared to the previous year, remaining at 8.1%. For Robert Frick, corporate economist at Navy Federal Credit Union, “despite the early May and permit data, June figures showed homebuilders are still struggling with high mortgage rateshigh construction costs and limited land to build on,” said
The expert noted that “more new homes were never going to save a real estate market scarred by low inventory, expensive houses and high fees, but it has been helping this year, especially since the median price of a new home has fallen“he added.
Given the lack of inventory, builders are benefiting, however, mortgage rates represent a great threat to the sector. First American Financial Corporation Deputy Chief Economist Odeta Kushi said that “there is still pent-up demand in the housing market, but higher rates put pressure on affordability,” he said.
For the last week of June, the average 30-year fixed-rate mortgage stood at 6.67%, but in the middle of this month it rose to 7%. “Reduced affordability coupled with continued supply-side challenges and tighter credit standards for acquisition, development and construction loans could strangle builder momentum,” Kushi said.
The report also showed that multi-family housing starts of five units or more decreased by 11.6%. Building permits similarly decreased at an adjusted annual rate of 1.44 million.
“Although builders continue to be cautiously optimistic about market conditionsthe quarter-point rise in mortgage rates over the past month is a stark reminder of the intermittent process the market will experience as the Federal Reserve nears the end of the ongoing tightening cycle,” said Robert Dietz, economist head of NAHB.
Source: La Opinion