As The Mortgage Rates Spike Again the Demand Homes Decline Causing an Over Supply in The Real Estate Market by mbdailynews

New home construction and permit applications for single-family homes decreased in September, confirming that high mortgage rates are increasing demand and reducing new construction.

According to data released Wednesday, residential starts last month fell 8.1% to an annualized rate of 1.44 million.

Single-family home construction fell to an annualized rate of 892,000, the slowest since May 2020.

Construction of multi-family homes also decreased.

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Taking permit applications for new construction as an indicator of development to come, these increased to 1.56 million annualized units, most of these for multi-family properties. But permits to build single-family homes fell 3.1% to a low of 872,000 in September, something that had not been seen in more than 2 years.

The housing market seems to be the most affected by the continium increase in mortgage rates from the Federal Reserve, these increases are intended to free the economy from recession.

Their goal is to save the economy from falling into deeper recession. The real estate market is susceptible to rising borrowing costs, and it is expected that the Fed will follow with another hike of about 75 basis points in early November, reported James Travis of the Bloomberg Digital.

“I very much doubt that we are bottoming out in housing starts,” said Stephen Stanley, chief economist at Amherst Pierpont Securities LLC, in a note. “Most likely, there is more pain to come.”

The perception of work of homebuilders has decreased month after month, reaching a level worse than that of the beginning of the pandemic, according to data released Tuesday. A super composite index of S&P construction stocks has slumped around one 35% so far this year, compared to a drop of about 22% in the S&P 500.

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The slowdown in demand this year, coupled with steady hiring, has led to some easing of restrictions.

Jobs for builders. Construction payrolls are at their highest point since 2007.

The government report also showed further progress in housing construction, increasing the number of houses completed to a maximum of four months.

House openings fell in three of four regions, led by a 13.7% drop in the South, as fewer multi-family projects started.

In the West, new construction of single-family homes plunged 15.8% at the slowest pace since April 2020.

Existing home sales for September will be released on Thursday, followed by new home purchase data next week.