Higher Mortgage Rates Are Taking a Toll on New Construction
As rising mortgage rates continued to quell homebuyer demand and force builders to scale back their plans, U.S. housing starts fell 4.2% in October to an annual pace of 1.43 million from 1.49 million in September. Mortgage rates have yet to peak as the Fed continues its rate-hike campaign meant to slow inflation, and in the meantime, new-construction projects are being placed on hold.
Single-family home construction fell 6.1% to an annual rate of 855,000 in October, housing starts dropped 9% year-over-year, and permits are down 10% on an annual basis, Realtor.com reports.
The highest mortgage rates in several decades have stifled new construction and are likely to do so through the next year or longer. The rate on a 30-year fixed mortgage recently topped 7%, more than double the rate a year ago.
While the U.S. has an acute need for more housing, fewer people can now afford to buy a home. Home prices are starting to come off record highs, but not by much.