New housing starts fell unexpectedly sharper than economists predicted in July, dropping to the lowest level in more than a year as home builders dealt with lower demand for new homes. Others are becoming increasingly bearish.
According to the Census Bureau, housing starts, or the number of new homes that began construction, plummeted 9.6% last month to about 1.5 million, despite the average economic forecast predicting more than 1.5 million construction starts. 1.4 million. report Tuesday.
Construction permits were slightly better than expected at about 1.7 million, down about 1.3% from June and down from about 1.8 million in April.
“Builders are responding to weaker demand,” First American economist Odeta Kushi said in an emailed statement, adding that rising mortgage rates have reduced affordability and “buying interest.” People started to look on,” he explained.
On one bright side, multifamily unit permits rose 2.8% last month, helping to offset a 4.3% plunge in the multifamily sector. Kushi believes lower timber prices and still-high rents may encourage builders to build multifamily homes. Units often rented.
But some are more cautious. Fitch Ratings released a memo Tuesday morning warning that US housing could slip into a deep recession as more and more homes are built. out of reach For Americans.
The company expects housing market activity (such as construction starts and sales of new homes) to remain in a “moderate recession” next year, characterized by a mid-single-digit decline, although residential activity will remain at about 30% or more. The worst-case scenario, which he also admits could go down, would take years, pushing home prices down by between 10% and 15%.
“The entire housing sector is in recession,” said Ian Shepardson, chief economist at Pantheon Macro, adding that the latest data show multifamily starts have surged since early 2021, with a record It shows that the peak has been reached after reaching a certain level. Shepherdson said the downward trend in construction activity he predicted would continue into early 2023, given that mortgage applications have yet to bottom out, down 30% from its peak in December. I’m here.
Historically high savings rates and low interest rates helped ignite a homebuying frenzy during the pandemic, but the housing market cooled after the Federal Reserve began raising rates this year. The latest data arrives just one day after the National Association of Home Builders. report Homebuilder confidence has plunged to its lowest level since May 2020. Continued increases in construction costs and high mortgage rates continue to undermine market confidence. NAHB chief economist Robert Dietz said in a statement that the market had entered a “housing recession” and predicted that single-family home starts would decline in 2022 for the first time since 2011.
Things to watch out for
There are still more housing datasets to be published this week. On Thursday, the National Association of Realtors will report data on last month’s existing home sales. On average, economists expect annual sales to fall by about 6% to 5.1 million.