Home News New home building picked up last month, but builder sentiment remains low

New home building picked up last month, but builder sentiment remains low

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Homebuilding rebounded slightly last month, even as demand for new homes among buyers began to cool and the cost of building materials remained high.

According to the US Census Bureau, housing starts in August were up 12.2% from July and down 0.1% from a year ago. After a sharp drop earlier this spring, housing starts were relatively stable until last month.

This recent increase in new housing starts is good for the housing market as inventories are very tight. Part of the reason house prices are rising is that amid soaring demand, a shortage of supply has been a major factor driving house prices higher.

“Last month’s rise suggests that builders are still seeing profit opportunities even as they concede prices,” said Lawrence Yun, chief economist at the National Association of Realtors.

Most of the increase in housing starts in August was in multi-family homes of five or more units, up nearly 30% from July. Single-person households rose slightly, up 3.4% from a month ago.

Still, there are signs that the housing market remains volatile and builders remain cautious.

August building permits plummeted by 10% from the revised July rate, down 14.4% from a year ago.

And homebuilder confidence fell for the ninth straight month in September to its lowest point since 2014 (excluding 2020), according to a survey released on Monday.

Emotions went down like higher mortgage interest rates, homes were not affordable for buyers as supply chain problems continued and house prices remained high. The National Association of Home Builders/Wells Fargo Home Market Index is intended to assess market conditions, looking at current sales, buyer traffic and sales prospects over the next six months.

NAHB President Jerry Konter said:

NAHB chief economist Robert Dietz said builder sentiment is falling month by month in 2022 and the slowdown shows no signs of abating.

“Builders continue to grapple with rising construction costs and aggressive monetary policy from the Federal Reserve, which last week pushed mortgage rates above 6%, the highest level since 2008.” He said.

However, there was a slight upward trend for buyers, according to the report. He was 24% of builders who reported lower home prices in September, up from 19% last month.

“In this soft market, more than half of the builders surveyed report using incentives such as mortgage rate buybacks, complimentary amenities and markdowns to boost sales,” Dietz said. .

But RCLCO Real Estate Consulting’s Kelly Mangold said it’s a typical cycle in which homeowners “move” from starter homes to more expensive new homes as rising mortgage rates make it harder to buy homes. may have stalled, he said.

“Many potential ‘moving in’ buyers who are likely candidates for high-priced new homes may also be considering the benefits of staying in their current homes. Mortgage interest rates may be half or less than current rates. It’s a contributing factor to lower housing liquidity,” she said.

And many first-time buyers are choosing to remain lessees as well.

Multifamily monthly performance in August was the best in 35 years, and rents remain at record highs in many parts of the country.

“Apartment demand is strong and rents are rising at a historically high pace,” said Yoon. “Consumers unable to qualify for mortgages at higher interest rates are renewing their rental leases. Job creation is also boosting rental demand.”

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