New home construction falls again in October amid soaring interest rates
New home construction fell again last month as soaring interest rates continued to weaken demand in the housing market.
Housing starts declined by 4.2 percent from September to 1.43 million units, according to Census Bureau data released on Thursday.
The number of new building permits issued in October also fell from the previous month, dropping by 2.4 percent to 1.53 million.
“Both starts and permits fell behind September levels and behind levels from one year ago,” Zillow senior economist Nicole Bachaud wrote in an analysis.
“As the current affordability crisis burns on, builders are feeling demand for new homes slipping further away, depressing confidence in their ability to sell their completed projects at the prices they need,” Bachaud added.
The Federal Reserve’s series of interest rate hikes targeting rising inflation have led to high mortgage rates that are pushing prospective buyers out of the market.
Recent data shows that monthly mortgage payments have more than doubled from pre-pandemic levels, reaching $1,840 for a typical single-family home after a 20 percent down payment.
These high rates are also driving home builder sentiment to decade lows, according to data released Wednesday by the National Association of Home Builders (NAHB).
The NAHB/Wells Fargo Housing Market Index found that homebuilder confidence in the market for newly built single-family homes fell for the 11th straight month in November, reaching its lowest level since 2012.
The index found that homebuilders are looking for ways to encourage more buyers to enter the market, with 37 percent saying they have cut prices. Overall, 59 percent of homebuilders said they are using some sort of incentive.
“Higher interest rates have significantly weakened demand for new homes as buyer traffic is becoming increasingly scarce,” NAHB Chairman Jerry Konter said in a media release.
“With the housing sector in a recession, the Biden administration and new Congress must turn their focus to policies that lower the cost of building and allow the nation’s home builders to expand housing production.”
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