New home construction cools as more people get priced out of the housing market

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July housing starts, a measure of new home construction, plunged 9.6% month-over-month and 8.1% from a year ago, according to the US Census Bureau. After a big drop earlier this spring, starts held relatively steady and now have dropped again.

Separately, a survey released Monday found home builder confidence fell for the eighth straight month in August as elevated mortgage rates, ongoing supply chain problems and high home prices continued to make homes less affordable for buyers. The National Association of Home Builders/Wells Fargo Housing Market Index is meant to gauge market conditions and looks at current sales, buyer traffic and the outlook for sales over the next six months.

“Ongoing growth in construction costs and high mortgage rates continue to weaken market sentiment for single-family home builders,” said Jerry Konter, a NAHB chairman and a home builder and developer from Savannah, Georgia.

With the exception of the spring of 2020 when the pandemic first hit, buyer traffic in August hit its lowest level since April 2014, a troubling sign that consumers are now sitting on the sidelines due to higher housing costs, he said.

The building slowdown comes as rising mortgage rates and home prices continue to discourage potential buyers. The average rate on a 30-year fixed-rate loan has risen two percentage points since January and is now at 5.22%.

August 16, 2022 at 07:49PM

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