By Lucia Mutikani
Washington (Reuters)-Future US housing permits fall to five-month lows in April, as rising mortgage rates help lower entry levels and affordability for first-time buyers , Suggesting that the housing market has slowed.
However, a report from the Commerce Department on Wednesday also shows a record backlog of homes that have not yet been built, showing that homebuilding easing is modest.
Housing construction was already constrained by soaring prices and a shortage of materials. The housing market is the sector of the economy most sensitive to interest rates, and building permits are a key indicator of this sector.
“Housing construction continues to grow as the backlog of the project continues to grow, sandwiched between sharp rises in mortgage rates, falling affordable prices, and supply chain constraints,” said senior Conrad Dequadros. It seems to be in transition. ” Economic Advisor to Breen Capital in New York.
Building permits fell 3.2% to a seasonally adjusted annual rate of 1,819 million units in April. This is the lowest level since last November. It increased by 3.1% from the previous year. Economists surveyed by Reuters predicted that building permits would drop to 18.12 billion units.
The decline is concentrated in the single-family home segment, with permits plummeting 4.6% to 1.11 million, the lowest level since October last year. Permits for buildings with 5 or more units decreased by only 0.6% to a percentage of 656,000 units.
The National Association of Home Builders / Wells Fargo Housing Market Index fell to its lowest level in almost two years in May, according to a survey on Tuesday. Builders have accused sentiment of falling for the fifth straight month due to soaring prices for building materials and soaring mortgage rates.
According to data from mortgage lender Freddie Mac, 30-year fixed-rate mortgages averaged 5.30% for the week ending May 12, the highest since July 2009. It has increased by more than 100 basis points since mid-March, when the Federal Reserve began raising interest rates to cool domestic demand and lower high inflation.
The US central bank has raised the policy rate by 75 basis points since March. The Federal Reserve is expected to raise that rate by 0.5 percentage points at the next policy meetings in June and July.
“Higher mortgage rates create uncertainty in at least the path of housing demand and discourage builders from getting speculative housing permits,” said Isfer Munir, an economist at Citigroup in New York. Let’s do it. “
Construction backlog record
A chill in housing demand has shown a 12% drop in home lending applications from last week, according to another report from the Mortgage Bankers Association on Wednesday. It decreased by 15% from the previous year.
Wall Street stocks were down. The dollar has risen against a basket of currencies. US Treasury yields have fallen.
Last month, housing starts fell 0.2% to 1,724 million units. The number of single-family homes, which occupy the largest share of housing construction, decreased by 7.3% to 1.1 million, the lowest level since October last year.
Single-family home construction declined in the northeast, midwest, and densely populated south, but increased in the west.
Construction starts for the housing business with five or more units increased by 16.8% to 612,000 units, the highest level since April 1986. The demand for rental condominiums is very high.
Rent vacancy rates rose in the first quarter, but remain close to the lows seen in the mid-1980s. There is room for further profit in the construction of apartments, and permits are enforced before the start.
Housing construction remains supported by record low housing supplies, despite a decline in overall start-up for the second straight month. The number of homes approved for construction that have not yet begun increased by 0.7%, reaching a record high of 288,000 in April. The backlog of single-family homes was the largest since June 2006.
Home completion fell 5.1% to 1,295 million units, while single-family homes fell 4.9%. The number of completed apartments decreased by 6.6%.
Inventories of single-family homes under construction increased 1.0% last month to 815,000, the highest since November 2006. The number of single-family homes under construction increased by 2.3% to 811,000, the highest since February 1974.
“The housing market is still undersupplied, there is a significant shortage of housing, and it will not recover in the short term,” said Abbey Omodumbi, senior economist at PNC Financial in Pittsburgh, Pennsylvania. ..
(Report by Lucia Mutikani, edited by Chizu Nomiyama and Paul Shimao)