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Home Construction Dipped Slightly in December | Economy

New home construction slipped modestly in December as mortgage rates remained high, the Census Bureau and the Department of Housing and Urban Development reported on Thursday.

Building permits declined 1.6% from a month earlier, and housing starts were down 1.4%. While the permit numbers came in below estimates, housing starts were better. Still, the numbers were a little better than estimates but still reflect the slowdown in the housing market from the Federal Reserve’s campaign to raise interest rates to arrest inflation. Mortgage rates have doubled in the past year, affecting the affordability of new homes.

However, recent improvement in the trajectory of inflation over the past two months and a general slowdown in the economy have brought mortgage rates down by about one point and builders have also been offering concessions to would-be buyers.

“Homebuilder sentiment increased for the first time in a year in January, though general perceptions among builders remain poor,” Odeta Kushi, deputy chief economist at title insurer First American, said ahead of the report’s release. “All three components of the index – current single-family home sales, traffic of prospective buyers, and future sales expectations – increased.”

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“With rates moderating in recent weeks, declining from their peak at 6.9% in October to 6.36% in December, builder sentiment suggests that potential buyers are responding by returning to the market,” Kushi added. “In the new home market, builder incentives such as price cuts, paying points, and providing mortgage rate buy-downs are being used to bolster sales, and buyers are being enticed back. As mortgage rates cool and the spring homebuying season comes around the corner, it’s possible that the worst of the impact on transaction volumes in the housing market is behind us.”

Separately on Thursday, the number of Americans filing first-time claims for unemployment benefits fell by 15,000 to 190,000 last week. The four-week moving average was 206,000, a decline of 6.500 from the prior period. The weekly number was better than expected and the first reading below 200,000 in months. But the data tends to be volatile.

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