The housing construction industry’s struggles as mortgage rates continue to rise.
Gradual decrease in housing is being experienced by the housing construction industry after the rise in mortgage rates. (Photo: Property Industry Eye)
Problems With The Housing Construction Industry
Problems with housing construction industry have been arising and US is experiencing a shortage of single-family homes, but builders remain confident that increasing construction will attract buyers. The housing construction industry is no longer indicating a recession, and housing permits serve as a leading economic indicator.
Aside from the housing construction industry, mortgage rates have been fluctuating, currently averaging at 7.36% for a 30-year fixed-rate mortgage. Although lower than the recent peak of over 8%, it remains significantly higher than pre-pandemic years. The housing construction industry thrived during the pandemic due to low interest rates, driving up demand and prices.
However, the rise in mortgage rates has impacted the housing construction industry, leading to a gradual decrease in housing starts since their peak in April 2022. Homeowners are hesitant to sell their homes to avoid losing their lower mortgage rates, creating pressure on the housing construction industry.
According to a published article by Washington Examiner, the problems with the housing construction industry and the affordability and demand for housing have been affected by higher mortgage rates. The Federal Reserve’s decision to raise interest rates, which currently stand at 5.25% to 5.50%, has contributed to the increase in mortgage rates and problems experienced by the housing instruction industry.
Demand For Residential Real Estate
In a published article by Reuters, residential investment rebounded in the third quarter after nine consecutive quarters of decline.
if mortgage rates decrease in the second half of next year, there could be increased demand for residential real estate. Single-family housing starts rose by 0.2%, with increases in the Northeast and West, but decreases in the South and Midwest.
Homebuilder confidence also fell to an 11-month low due to anticipation of lower future sales and mortgage rates remaining above 7% since mid-August.
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