'Millions Of Homes Will Stay Unbuilt': What Builders See That Policymakers Don't

The disconnect between policymakers’ housing aspirations and market realities continues widening, with October’s housing starts and permits dropping to recession-level figures despite widespread calls for increased construction.

Don't Miss:

• Unlock the hidden potential of commercial real estate — This platform allows individuals to invest in commercial real estate offering a 12% target yield with a bonus 1% return boost today!
• This Jeff Bezos-backed startup will allow you to become a landlord in just 10 minutes, with minimum investments as low as $100 for properties like the Byer House from Stranger Things.

Recent data from the Census Bureau reveals housing starts fell 3.1% below September’s revised estimate, landing at a seasonally adjusted annual rate of 1,311,000 units. Building permits declined 0.6% from September, marking a 7.7% drop from October 2023.

The numbers create friction with recent comments from Federal Reserve officials, including Minneapolis Fed President Neel Kashkari, who, according to HousingWire, suggested housing demand remains robust enough to warrant higher mortgage rates.

The data tells a different story, with existing home sales hitting their third consecutive year of record lows when adjusted for workforce size.

Trending: Invest in $20+ trillion home equity market today across cities like Austin, Miami, and Los Angeles through a unique 5-year term fund targeting a 14-20% IRR with minimums as low as $2,500

Builder behavior offers telling insights into market conditions. HousingWire said construction companies have shown increased optimism when mortgage rates approach 6%, but consistently pull back when rates climb between 6.75% and 7.5%. The pattern extends beyond single-family homes, with multiunit permits already at recession levels.

The market’s sensitivity to interest rates became evident during a brief period of improved builder confidence when mortgage rates temporarily dipped from 7.5% to 6%. While builders maintain the ability to boost sales through rate buydowns, sustaining rates in the low 6% range has proved challenging.

Looking ahead, the path to increased housing construction faces hurdles. Lower Fed rates could theoretically support land purchases and apartment construction, but those developments require extensive lead time. The current construction slowdown risks exacerbating rent inflation as supply constraints persist.

See Also: Maker of the $60,000 foldable home has 3 factory buildings, 600+ houses built, and big plans to solve housing — you can become an investor for $0.80 per share today.

New home sales lag behind levels seen during the 2001 tech recession, highlighting the severity of current market conditions. The reality sharply contradicts predictions from 2021 that anticipated a decade-long construction boom.

Instead, rising interest rates have dramatically cooled building activity.

The report said that significant construction growth appears unlikely until mortgage rates stabilize at lower levels and remain there. While the expanding economy and Fed policies may limit how far rates can fall, even a sustained move toward 6% could reinvigorate building activity.

For now, "millions of homes will stay unbuilt," said Logan Mohtashami, mortgage and housing ecosystem expert and author of the HousingWire report. 

Read Next:

• Commercial real estate has historically outperformed the stock market, and this platform allows individuals to invest in commercial real estate with as little as $5,000 offering a 12% target yield with a bonus 1% return boost today!
• These five entrepreneurs are worth $223 billion – they all believe in one platform that offers a 7-9% target yield with monthly dividends