Soaring inflation and mortgage rates are leaving prospective buyers with few affordable housing options, and despite an ongoing housing supply shortage, builders are sustaining elevated costs by pulling back from new-construction projects. Housing starts fell 8.1% from August to September as homebuyer demand came to a standstill, and according to Robert Dietz, chief economist for the National Association of Home Builders, 2022 could also be the first year to see an annual decline for single-family starts since 2011.
Buyers’ fading demand is crushing builder confidence, and to top it off, the Fed has signaled that it will continue to send rates higher, ensuring that mortgage rates will continue to climb through 2023, Insider reports.
There's little hope for a quick change of mind. Homebuilder confidence sank for a 10th consecutive month in October, according to the National Association of Home Builders and Wells Fargo, weighed down by crashing demand and material bottlenecks. The firms' sentiment index is now half the level it boasted just six months ago, and marks the weakest sentiment in more than a decade aside from a colossal drop seen at the start of the pandemic.
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