Census Bureau and the Department of Housing and Urban Development released a report that showed permit issuance had increased by 1.1% to 1.487 million annually, compared to 1.471 in September. The number of new housing starts was 1.372 million, compared with 1.346 million a month ago. Both starts and permits were higher than expected.
The report was released a day following the release of Wells Fargo and the National Association of Home Builders survey of builder sentiment for October. The index fell six points to 34. This is the lowest level since December 2022.
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The Midwest and West saw the most homebuilding activity during October, while deliveries of new single-family homes in the Northeast continued to stall. This is due to a variety of factors, including weather, supply-chain issues, and the difficulty in getting new housing permits,” said Bright MLS’s Chief Economist Lisa Sturtevant.
She added, “There could be some bright spots in the coming months for homebuilders.” A good inflation report and the steadily decreasing mortgage rates provide some relief for the market. Many people and families want to purchase a house but are waiting for more inventory.
Builders have a lot of opportunities with homebuyers, as inventory is low and demand high. Incentives and mortgage buydowns often accompany new homes. Data was collected also before the report this week, showing that the consumer price index fell from 3.7% to 3.2% in September.
There are more signs of falling inflation. Mortgage rates also fell this past week following the CPI. This was due to the bond yields dropping from recent highs. Freddie Mac reported on Thursday that the 30-year fixed rate mortgage fell to an average of 7.44% for the week ending November 16, a decrease from 7.5% a few weeks earlier.
Odeta Kush, First American’s deputy chief economist, said that builders have benefited from the lack of resale stock and their ability to offer incentives like mortgage rate buydowns in order to get buyers to come off the sidelines. In this way, builders have a competitive advantage over the resale marketplace.
Kelly Mangold, RCLCO Real Estate Consulting, added: “The increased number of starts in this month indicates that builders anticipate positive conditions for the next year once these homes are available to buyers.”
Bright MLS’s Chief Economist Lisa Sturtevant commented on Wednesday’s report. “While new construction won’t immediately solve the supply issue in the housing markets, the recovery of the homebuilding industry is important for meeting the country’s housing requirements and easing affordability challenges for potential home buyers.”
Kelly Mangold of RCLCO Real Estate Consulting said, “Dem,and from millennials for homes is high. However as boomers enter their retirement years they are often moving and have significant home equity.”
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The report was released a day following the release of the National Association of Home Builders’ monthly survey, which showed that confidence among builders increased by 1 point in June. This is the seventh consecutive rise and the highest level seen since last year.
The lack of homes on the market is a benefit to new home construction since homeowners who have low mortgage rates choose not to sell their properties.
The lack of resale stock means that prospective homebuyers who are not priced out of the marketplace continue to seek new construction said NAHB chairman Alicia Huey. Huey is a custom homebuilder from Birmingham, Alabama. Builders are also concerned about rising mortgage rates, which have reached 7%, and they continue to struggle with supply-side issues, such as the scarcity of transformer equipment for electrical power and concerns over lot availability.