Posted by on September 19, 2023 8:39 am
Categories: News Washington Examiner

Housing starts fall to lowest level since 2020 as mortgage rates remain high

A builder works on the the roof of a new home under construction on Friday, Dec. 27, 2013., in Wilmette, Ill. (AP Photo/Nam Y. Huh) Nam Y. Huh

Housing starts fall to lowest level since 2020 as mortgage rates remain high

Zachary Halaschak September 19, 08:32 AM September 19, 08:34 AM Video Embed

The number of housing starts fell in August, an indication of the challenges facing the housing market.

Housing starts, the change in the number of new residential buildings that began construction, fell 11.3% from July to this past month, according to a Wednesday report from the Census Bureau. They are now at a seasonally adjusted annual rate of 1.283 million. From August 2022, they fell 14.8%. That marks the lowest levels since June 2020.

For permits to build, which are seen as a proxy for future construction, the rate of new permits last month was 2.7% below the rate in August of last year.

Mortgage rates have been pushed to multi-year highs recently as the Federal Reserve keeps its interest rate target high. The average rate on a 30-year fixed-rate mortgage is now punching above 7.31%, according to Mortgage News Daily. That is near the highest it has been since the turn of the century.


The housing market was red-hot during much of the pandemic because the Fed cut interest rates to near-zero levels, resulting in ultra-low mortgage rates for homebuyers. Those historic rates spurred a massive wave of demand, causing prices to rise and construction to skyrocket.

That changed last year, though, and demand plunged as the Fed hiked rates and mortgage rates surged far higher than the sub-3% levels during the pandemic’s easy money period. Prices also fell amid the cooling demand.

But there have been some more recent indications that the housing market still has some momentum despite the high mortgage rates.

The new homes market has gotten some heat because existing home inventory is so low. The buyers who locked in those ultra-low mortgage pandemic-era mortgages are holding on to their homes and not putting them on the market because they got such good deals — meaning that prospective buyers must turn to new homes.

New home sales rose 4.4% from June to July to a seasonally adjusted annual rate of 714,000, according to the most recent report from the Census Bureau. Sales in July were 31.5% higher than in July 2022.

Meanwhile, existing home sales fell by 2.2% from June to July to a seasonally adjusted rate of 4.07 million, according to a report by the National Association of Realtors.


Rents are also rising, adding to the affordability issues that consumers are facing.

A report from released last week found that rent prices rose by just over 0.7% in August. The national median rent price is now $2,052, which is just $2 away from the dataset’s record notched in August 2022.

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