Jeff Tucker, chief economist for the City of Windermere, noted the decline in new construction in October compared to the previous month.
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In this exclusive series on Inman, Windermere Chief Economist Jeff Tucker reveals the latest statistics, reports and numbers you need to know this week.
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Number you know: 970K
This is the annualized pace of new single-family homes built in October, according to the latest new home construction survey released on November 19th. This is a significant decline from the pace of 1,042,000 in September (revised value), and is generally lower than forecasters’ expectations.
Back in 2021, builders were operating at well over 1 million starts per year until interest rates rose in 2022, dampening builders’ enthusiasm.
However, a closer look at the regional details in the New Construction Report reveals that single-family home starts actually increased by about 5 percent in the Western Census Region, with 229,000 new homes built per year. It turns out. This headline decline was driven by declines in the South (which typically accounts for nearly half of new construction) and the Northeast, which is the smallest and loudest region.
Number known: 326K
This is the annual pace of new multifamily construction starting in October, based on the new housing construction report from the same census. While this is a little more noisy than the single-family home survey and certainly represents a step up from September’s revised pace this month, apartment construction is still at a low level and is expected to remain on track for a boom that peaks in 2022. is relatively depressed. That’s lower than most months before the pandemic.
Although the census does not disclose the regional breakdown of the number of housing starts, if we calculate backwards from the difference between the total number of housing starts and the number of single-family housing starts, we can see that the number of housing starts for buildings with two or more units has increased significantly in the West. . Units: 60,000 to 109,000, annualized. Now, this is a noisy data series and one shouldn’t read too much into one month’s data, but it’s still a strong sign for Western builders.
Number known: 46
These are the preliminary numbers for the November housing market index released by Wells Fargo and the National Association of Home Builders. The index is constructed such that a number above 50 means the majority of builders are confident in the current and near-term situation.
November’s score of 46 is the closest score to that threshold since April of this year. In a press release, the president of the builders association pointed to growing confidence in deregulation, while the association’s chief economist said high interest rates and the possibility of higher tariffs could dim the outlook for the industry next year. I was warned that there would be. Nevertheless, overall, builders are starting to feel a little better about their prospects.
Historically, as confidence in builders increases, housing starts increase, as measured in this study, but that relationship has broken down in recent years. In fact, even at this point, there is far more single-family home construction going on than you would expect from this moderate builder trust.
The simplest explanation for this discrepancy is that the Housing Market Index survey was sent to a broad sample of home builders, essentially overestimating the prospects of smaller home builders relative to their share of new homes. I think it means that there is a trend.
Over the past few years, the largest listed home construction companies have maintained strong financial foundations and continued to grow, even after interest rates rose, by offering interest rate buybacks to customers.
Final numbers known so far: 7.08% or 6.78%
These are the two most recent measurements of mortgage rates, one from Mortgage News Daily as of November 18th and the other from Freddie Mac’s Key Mortgage Market Survey as of November 14th. is. The two weeks following the election have been unusually volatile, so we decided to feature it alongside Freddie Mac’s popular weekly survey. This is partly because the two sources are different. The past few months have been a little more than usual.
It’s a good reminder that there is no one source of truth about mortgage rates, and that each person’s interest rate will depend on their specific circumstances and lender.
Still, the big thing I can see here is that while interest rates have risen sharply from their mid-September lows, they may be stabilizing after the past two months of increases and are still at a historical level. This means that the price is slightly lower than the high price it hit. May of this year or October of last year.
Jeff Tucker is principal economist at Windermere Real Estate in Seattle, Washington. Connect with him on X or Facebook.
