A housing market that has shown indications of heating up recently after being pounded by the Federal Reserve’s rate hikes is still facing some problems, as evidenced by the fall in house starts in June.
Housing starts track the variation in the number of brand-new homes that have started being built. According to data released on Wednesday by the Census Bureau, it started to decline by 8% from May to this past month. They currently number 1.43 million on an annualized basis. In May 2022, they decreased 8.1%.
The seasonally adjusted annual rate of new construction permits, which is used as a proxy for
upcoming construction was 15.3% lower in May of last year.
Given the unusual circumstances the country’s housing market is in right now, the most recent report will surely be widely followed.
Due to the Fed’s reduction of its interest rate objective to values close to zero, which resulted in extremely low mortgage rates for homeowners, the housing market was booming throughout most of the epidemic.
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Decreased Demand and Rising Mortgage Rates
These historically high rates sparked a wave of demand, which in turn drove up costs and sped up construction.
The situation changed last year, as demand rapidly decreased as the Fed increased interest rates and mortgage rates shot up to 7%, a significant increase from the sub-3% levels experienced during the easy money period of the epidemic.
Then, earlier this year, prices started to decline amid what many experts considered a housing recession.
But now things are a little more complicated. Despite the fact that mortgage rates have reached their highest level since November, prices have started to rise.
This is mostly due to the demand for new homes and new construction being fueled by the lack of supply of existing homes. Sellers might raise their pricing because of the scarcity.
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Source: www.washingtonexaminer.com