New Construction Picks Up in November as Builders Pull More Permits
According to U.S. News, builders took out more building permits for future construction in November while starting on slightly fewer new homes, the Census Bureau reported on Wednesday.
The numbers reflect increasing confidence by home builders, while the housing starts dip could be weather related as it came after the country grappled with the effects of Hurricane Milton.
The number of permits rose by 6.1% to an annual rate of 1.5 million from the revised October reading of 1.42 million. Starts fell by 1.8% to 1.29 million from an upwardly revised 1.31 million a month earlier. The permits number beat expectations while housing starts came in below forecasts.
The housing sector – one of the strongest performing following the recovery from the COVID-19 pandemic – is now struggling with high mortgage rates, limited supply and rising costs of materials.
“It is clear that there is a lot of pent-up demand in the housing market, and more single-family inventory is needed to meet that demand,” said Lisa Sturtevant, chief economist at Bright MLS. “The challenge for home builders is not on the demand side. Supply-side factors, including rising costs of materials and labor, along with almost-limited land for development, will be the primary constraints on homebuilders in the year ahead.”
Indeed, builder confidence has been trending upward in the past couple of months, according to an index from the National Association of Home Builders and Wells Fargo.
“While builders are expressing concerns that high interest rates, elevated construction costs and a lack of buildable lots continue to act as headwinds, they are also anticipating future regulatory relief in the aftermath of the election,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kansas. “This is reflected in the fact that future sales expectations have increased to a nearly three-year high.”
A lot will depend on the future direction of mortgage rates that are now at 6.75% for a 30-year fixed rate loan. The Federal Reserve is expected to lower interest rates Wednesday by a quarter point, but that will not make much difference to mortgage rates. Further cuts are expected in 2025.
