Permits for new construction, housing starts and housing completions were all below 2017 levels in October, according to data released Tuesday by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD).
New privately owned housing units authorized by permits sat at a seasonally adjusted rate of 1,263,000, a 0.6-percent decline from last month and 6 percent below October 2017.
Housing starts came in at a seasonally adjusted rate of 1,228,000, which was a 1.5 percent jump up from last month, but 2.9 percent below October of last year. Most of the month-over-month gains came in the multi-family sector, where starts were up 6.2 percent. Single-family starts actually declined 1.8 percent, month-over-month.
Housing completions were also down significantly to a seasonally adjusted rate of 1,111,000, which was 3.3 percent below last month and 6.5 percent below October 2017.
“Consumers are less optimistic about home buying right now, and builders are starting to notice,” Danielle Hale, chief economist at realtor.com said, in a statement. “While still at a positive level, confidence slipped notably in November.”
“Looking ahead, starts could slip further if builders believe the consumer pause will continue and they adjust production accordingly,” Hale added. “Rising home prices and rising mortgage rates have created high hurdles for homebuyers while cost increases make it difficult for builders to deliver homes at the price points that are most in-demand.”
Tendayi Kapfidze said rising rates, prices and taxes are contributing to the housing slow down.
“Average mortgage rates rose to 4.94 percent last week according to Freddie Mac, the highest in seven years,” Kapfidze said. “This has made housing about 15% less affordable than a year ago. As there are less buyers at each price point, the appropriate market response is a slowdown in sales and an eventual easing in price momentum. Builders also face additional pressures from material and labor costs.”
Kapfidze added that he doesn’t believe the overall housing slowdown will have a broader impact on the economy.
“When we look at prior housing cycles, continued acceleration in home sales and prices would have to come at the cost of increasing leverage; this is how we got in trouble before,” Kapfidze said. “Had the market slowed in an orderly fashion in 2003/2004, we may have saved the economy from the woes unleashed later in the decade.”