Home Construction Is Getting Hammered By Higher Rates

Home Construction Is Getting Hammered By Higher Rates
Theodora Lee Joseph, CFA

over 1 year ago1 min

It’s not been an easy year for Americans trying to buy a new home, with the Federal Reserve’s aggressive interest rate hikes having pushed mortgage costs to their highest in a decade. And now those higher rates, coupled with the high prices of construction materials, are taking a toll on US homebuilders too.

Just take a look at the number of new houses being built, which tumbled 9.6% in July to an annual rate of around 1.5 million – the lowest since February 2021. And if you need one more sign of how things are going, applications to build new properties – an omen of where construction is heading in the future – fell 1.3% from the month before.

Whether you’re in the market for a new home or not, this is worth paying attention to. The extent of this slowdown tells us that the Fed’s rate hikes are already starting to have a negative effect, which means other parts of the economy may be next. And since the Fed has said it’s going to keep hiking rates until it has a whole lot of proof that prices are under control, there’s probably more pain to come for the US housing market...

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