The US housing market has been completely destroyed

Multi-family housing starts saw relative stability during the first quarter of the year and construction units were rising as delays to supply chain processes delayed projects’ completion. In the past two months, there has seen a significant decline in housing construction starts. The numbers for September were 31.5 percent lower than the previous year and the number of units under construction decreased for two consecutive months.

This indicates that we’re likely to be to be well past the point of peak. The rental market will continue to be a burden on the economy until 2024 as fewer units are being built and fewer are under construction.

From the standpoint of investors, this all matters in a period of high consumption and lofty expectations for the third quarter’s real GDP growth has led to a shocking decline in Treasuries. JPMorgan Chase. estimates that the economy grew by nearly 4 percent during the quarter.

Housing is one of the major contributors to the GDP growth, and should contribute to it for the first since early 2021. This summer’s rise in single-family home construction will help. This is unlikely to continue into the next quarter, or perhaps 2024, unless interest rates drop.

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The return of student loan repayments The United Auto Workers’ strike and the union that represents radio and television actors are just a few of the factors that could influence consumption.

This confluence may finally offer investors some respite from the flurry of hot economic data, which has been weighing on both bonds and stocks by fuelling prospects for further tightening of the monetary policy. Should that turn out not to be the case, it would suggest that the labour market and the consumer market have more momentum than appreciated – an uncomfortable scenario when the highest costs for borrowing since mid-2000 have broken one market.

The first time in a while since the Federal Reserve started raising interest rates, each aspect of the housing market is poised to worsen.

Since 2022’s beginning the resale market for housing has slowed as sellers resist to pay their low-interest mortgage rates. New homes had provided buyers some peace. But, not anymore. The recent increase in mortgage rates to as high as 8 percent is too much for home builders. Since profit margins are declining they are likely to reduce their construction in the months to come. Apartment construction has also rolled over in recent months as developers have been hit by the slowing rent growth and high financing costs.

It’s easy to comprehend the frustration of potential buyers of homes. What are the macroeconomic consequences? Given the importance of housing to overall activity as a whole, slowing residential construction could slow the pace at which the economy can grow but not enough to trigger a recession over the next couple of quarters. To the extent that the brutal sell-off in Treasuries has been in response to hotter-than-hoped-for economic data, a paralysed housing sector will offer some respite.

The housing market has reacted differently in 2022 to the recent increase in mortgage interest rates. The home-selling strike has boosted the demand for new homes. Homebuilders were the brightest spot in the market. The lack of inventory held prices high, which allowed companies to use their healthy profit margins to buy down mortgage rates and make it more affordable for potential buyers. This no longer seems to be the case.

It’s now much simpler to reduce the cost of a home-loan to 5.5 percent, which is the magic level for potential buyers, at about 7%, rather than 8 percent. Builders’ confidence is eroding along with their profits and stock prices.

The National Association of Home Builders/WellsFargo gauge of confidence dropped to its lowest point since the beginning of January. Builders may cut their plans for production in the coming months.

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