Homebuilding bounced back in September

[BumRushDaShow]

Source: CNN Business

Updated 9:35 AM EDT, Wed October 18, 2023


Washington, DC CNN — US homebuilding bounced back in September, after dropping in August to the lowest levels since 2020 as mortgage rates climbed.

Housing starts, a measure of new home construction, jumped 7% above the revised August estimate. Starts rose to a seasonally adjusted annual rate of 1.358 million last month, falling short of expectations of 1.38 million, according to data released Wednesday by the Census Bureau.

The number of units started was 7.2% lower than a year ago. Building permits dropped in September, falling 4.4% from August’s revised number to a seasonally adjusted annual rate of 1.473 million. Permits were 7.2% lower than a year ago.

“September numbers were a mixed bag, with starts up and permits down, but both remain low by historical standards, suppressed by high mortgage rates,” said Robert Frick, corporate economist with Navy Federal Credit Union. “Builders continue constructing smaller homes using less land, and offering incentives, but to build our way out of the housing shortage we’ll need mortgage rates well below current levels,” he said.

Read more: https://www.cnn.com/2023/10/18/business/new-housing-starts-september/index.html

[mucifer]

1. But interest rates are 7.9%

[FBaggins]

2. Not everyone purchases a home with a mortgage

Roughly 1/3 of US homes are fully paid for

Thinking about the rates from the other direction. Many retired middle-class Americans might find a "guaranteed 7.9% return" appealing (putting cash into a real estate asset rather than CDs or bonds).

[BumRushDaShow]

3. The chatter has been that they expect the banks/mortgage companies to start dropping the rates

possibly down to the 6+% range by the end of the year.

It's the tried and true - "increase until it 'breaks' and then back off just enough".

[peppertree]

4. Right. Cash purchases make up around 22% of sales currently - but normally much less than that.

https://www.nar.realtor/research-and-statistics/research-reports/highlights-from-the-profile-of-home-buyers-and-sellers

Historic data (the red bar is cash): https://www.statista.com/statistics/185206/us-house-sales-with-fha-and-va-insured-mortgages-from-2002/

[IronLionZion]

6. Wealthy people are fine with that

especially if they have money for all cash buys.

What lowers interest rates is recession. Fed raises interest rates to discourage people from buying mortgages and things requiring financing. They want fewer buyers. It's not great but that's what we got.

It should be noted that mortgage interest is tax deductible for those of us who itemize.

[4lbs]

5. There is a massive housing project going on near where I live. However, it has been planned

for several years. There have been meetings and such at city hall, as well as multiple Q&A sessions from the developer. People were allowed to voice their concerns and environmental impact studies were done. Yet, it finally got going at the beginning of September.

The plan was turn an old and abandoned building in a shopping center (a huge one, that was once used in 2021 for COVID vaccinations but is now empty. It is/was one of those huge retail superstores, and I grew up with it during the 70s and 80s. During the 90s and 2000s it was there but began to decline), into housing which is in great demand here. Not homeless or low-rent housing either. Single, Double, and 3-bd townhomes in the hundreds of thousands. More than 160 units total along with the parking, which is already mostly done because of the shopping center.

That and another nearby construction project are set to nearly double the value of my house by the time they are done a few years from now.