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News > U.S.

US Housing Starts Decline in September Amid Cooling Demand

  • Symbolic representation of the housing crisis.

    Symbolic representation of the housing crisis. | Photo: Twitter/ @USRealityCheck

Published 20 October 2022

"Only when inflation calms down will we see mortgage rates begin to steady," economist Yun pointed out.

On Wednesday, the U.S. Census Bureau reported that new construction of U.S. homes declined in September amid cooling demand in the housing market.


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Privately-owned housing starts in September were 8.1 percent below the revised August estimate and 7.7 percent below the September 2021 rate. New construction of U.S. homes rebounded in August after falling in July, previous data showed.

Privately-owned housing units authorized by building permits in September were 1.4 percent above the revised August rate, after falling by 10.0 percent in previous month. The latest figure is 3.2 percent below the September 2021 rate.

According to the National Association of Realtors (NAR), the Pending Home Sales Index, a forward-looking indicator of home sales based on contract signings, dropped 2.0 percent in August, sagging for the third straight month.

"The direction of mortgage rates -- upward or downward -- is the prime mover for home buying, and decade-high rates have deeply cut into contract signings," explained NAR Chief Economist Lawrence Yun.

"If mortgage rates moderate and the economy continues adding jobs, then home buying should also stabilize," he said, expecting the economy to remain sluggish throughout the remainder of this year, with mortgage rates rising to close to 7 percent in the coming months.

"Only when inflation calms down will we see mortgage rates begin to steady," Yun said, recalling that a steep rise in mortgage rates resulted from aggressive actions by the U.S. Federal Reserve (FED) in its efforts to get record inflation under control.

The FED has lifted interest rates five times since March, including three consecutive 75-basis-point rate hikes in June, July and September, taking its benchmark rate to a range of 3 to 3.25 percent.

At a press conference after the September meeting, Fed Chair Jerome Powell reiterated his message that the Fed is resolved to bring inflation down and "we will keep at it until the job is done." To accomplish that, the U.S. economy will see a period of growth below trend and softening in labor market conditions, he said.


Jerome Powell
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