Builders Slow Work on New Homes as Rising Mortgage Rates Temper Demand

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The numbers: Construction of new houses fell slightly in April for the second month in a row, suggesting that rising mortgage rates, record home prices and the high cost of building materials are starting to bite.

Housing starts dipped 0.2 % to an annual pace of 1.72 million. That’s how many homes would be built in 2022 if construction took place at same rate over the entire year as it did in April.

Economists polled by MarketWatch had expected housing starts to register a 1.75 million rate after adjusting for the typical seasonal swings in demand.

New construction rose to a nearly 16-year high in February before backsliding in the past two months.

The number of permits, meanwhile, slipped 3.2% to a 1.82 million rate.

Permits foreshadow how many houses are likely to be built in the months ahead assuming a stable economy. They hit a 15-year high at the end of last year as mortgage rates tumbled to record lows, but permits have since leveled off.

Big picture: It’s been the same old story before and after the onset of the pandemic. There’s just not enough housing to go around.

Rising mortgage rates and high prices are likely to reduce demand, but lots of people still want to buy their own homes. There’s just little evidence to suggest builders can or will significantly increase construction.

Key details: Single-family houses accounted for about 64% of new construction in April, well below its historic average. Starts fell 7.3% to an annual rate of 1.1 million.