Despite a housing shortage, the number of new homes being built is decreasing.
Key details
With high mortgage rates squeezing home buyers, builders are pulling back on new construction.
Housing starts fell 9.6% in July. Building permits were down 1.3%.
For the fifth time in a row, permits and starts for single family homes were down in July, Barron’s reports.
More expensive construction costs, higher mortgage rates, and continuing supply chain issues are all contributing to the cool down in construction, National Association of Home Builders economist Robert Dietz explained.
“Tighter monetary policy from the Federal Reserve and persistently elevated construction costs has brought on a housing recession,” Dietz says.
Builders are also slowing down due to lower consumer demand. Higher mortgage rates are limiting the houses buyers can afford.
Why it’s news
Even though construction is slowing and buyers aren’t making as many purchases, that doesn’t mean the need for housing has gone away.
Pew Research found that 49% of Americans have trouble finding affordable housing.
As prospective buyers change their minds about purchasing a home, some turn to rental options, creating a shortage of available rentals which has landlords increasing their prices.
Rent prices in Austin, Texas, rose 48% in the last year. Nashville, Tennessee, Seattle, Washington, and Cincinnati, Ohio, all rose 32%. Only Milwaukee, Wisconsin, Kansas City, Missouri, and Minneapolis, Minnesota, saw rents decline.
The average national rent grew 9.4%. The median national rent is $2,000.
