In the face of a historic shortage of housing inventory and soaring mortgage rates, new home construction in the United States saw a second consecutive monthly increase in October. Housing starts, a crucial measure of new home construction activity, jumped by 1.9% compared to the previous month, providing a glimmer of hope in an otherwise turbulent housing market.
According to data released by the Census Bureau on Wednesday, housing starts in October reached a seasonally adjusted annual rate of 1.372 million units, surpassing expectations that had pegged the figure at 1.35 million units. While this increase is certainly encouraging, it’s important to note that the number of units started remained 4.2% lower than the same period the previous year, reflecting the ongoing challenges in the housing sector.
Building permits, another essential indicator of the housing market’s health, also showed a positive trend in October. They rose by 1.1% compared to August’s revised numbers, reaching a seasonally adjusted annual rate of 1.487 million permits. However, like housing starts, building permits were down 4.4% compared to the previous year.
Kelly Mangold, a real estate expert from RCLCO Real Estate Consulting, shared her insights on the situation, stating, “The increase in starts this month shows that builders are anticipating positive conditions over the next year when these homes become available for buyers.” This optimistic sentiment among builders could signal a ray of hope for prospective homebuyers.
One of the primary factors affecting the housing market’s performance has been the rollercoaster ride of mortgage rates over the past two years. Rates have swung dramatically from below 3% to exceeding 7%. Many homeowners are currently locked into ultra-low mortgage rates, which has had a cooling effect on housing mobility. This phenomenon, in turn, has led to an increase in housing costs, exacerbating the existing inventory and mobility crisis.
Mangold further elaborated on this, saying, “An ease in rates would also benefit buyers of new homes, allowing for more affordable mortgage payments. The new construction housing market is poised to ensure that inventory is available to meet pent-up demand of households who have been waiting for a reprieve in rates before purchasing.”
The October uptick in new home construction offers a glimmer of hope for the housing market. However, challenges persist, with year-over-year figures still lagging. The industry will continue to watch for signs of stability in the face of fluctuating mortgage rates.