2023 Kicks Off with Slow Housing Starts
With U.S. housing starts declining 4.5% month over month to a seasonally adjusted annual pace of 1.309 million units in January, high-interest rates continued restraining residential construction activity. As a result, the housing starts fell for the sixth consecutive month, the longest run since 2009.
Building for single-family and multiple-family homes both experienced declines in January, with the former falling by 4.3% from December and the latter falling by 4.9%. The total number of housing starts has decreased significantly over the past year, by 21.4%, with declines in single-family starts (down 27.3%) and multifamily starts (down 8.1%).
Setbacks related to supply and materials and labor costs continue to hamper single-family starts, which dropped to a seasonally adjusted annual rate of 841,000 units last month. According to Odeta Kushi, deputy chief economist at First American Banking Corp, the construction of single-family homes that are already underway is still behind schedule. According to Kushi, builders will likely prioritize their backlogs over new beginnings because high-interest rates are still restricting demand.
Zillow’s Take on Housing
According to Zillow, they foresee a competitive shopping season despite the lack of available homes. Zillow adds that shoppers may anticipate competition for reasonably priced properties without the vast groups of potential buyers that swarmed open houses in 2021 and early 2022. Zillow also stated that the rapidly approaching spring home shopping season should feel quieter than in prior years.
In research done by First American Finance Corp., as of 2022, 84 percent of all existing mortgages have interest rates at or below 5%, and 63 percent have rates at or below 4%. There is a financial disincentive for homeowners locked into low mortgage rates to sell their homes and acquire a new one at a higher rate, according to First American Deputy Chief Economist Odeta Kushi.
House Price Inflation Stalls as U.S. Home Sales Fall for the 12th Consecutive Month
In January, existing house sales in the United States reached their lowest level in over 12 years. Still, the rate of decrease moderated, giving rise to cautious anticipation that the housing market downturn may be at its bottom. The National Association of Realtors’ study released on Tuesday also revealed the smallest yearly growth in home prices since 2012, which should assist in promoting affordability. Yet it will take some time before the housing market recovers.
In January, home resales, which make up the most considerable portion of housing sales in the United States, fell 36.9% year over year. While sales were up in the South and West, they were down in the Northeast and Midwest.
There are, nevertheless, some signs of hope. Although morale is still low, homebuilders’ confidence reached a five-month high in February. As a result of homeowners lowering their asking prices after their properties have been on the market for some time, the median price of an existing property increased 1.3% from a year earlier to $359,000 in January. Since February 2012, that was the smallest annual growth. Last month, homes stayed on the market for an average of 33 days, up from 26 days in December.
Vaimberg, Ron. “Weekly Newsletter – January 6, 2023.” Ron Vaimberg International, Ron Vaimberg, 6 Jan. 2023, https://rvionline.thinkific.com/courses/take/rvi-weekly-newsletter/texts/41523497-weekly-newsletter-january-6-2023.
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