Housing starts fell 2% last month to a seasonally adjusted annual rate of 1.559 million units, the lowest level since September 2021, the Commerce Department said on Tuesday. Data for May was revised up to 1.591 million from the previously reported 1.549 million.
Economists polled by Reuters had forecast starts at 1.58 million vehicles. Future home building permits fell 0.6% to 1.685 million units.
The housing market is very sensitive to interest rates and has softened significantly this year as the Federal Reserve aggressively raised rates to keep inflation at a 40-year high. The average contract rate on a 30-year fixed-rate mortgage climbed to nearly 6% in June from about 3.3% at the start of the year, making it impossible for a growing number of potential buyers, especially first-time buyers, to buy a home.
While it’s unclear how much mortgage rates will climb, it’s almost certain they’ll remain high for some time as the Fed raises rates again at next week’s meeting, with more to come by the end of the year.
The first quarter of 2022 was the most unaffordable at any time since the 2007-2009 financial crisis, according to the Oxford Economics index released last week, and forecasts that the situation will worsen for the rest of the year.
Meanwhile, the National Association of Home Builders/Wells Fargo Housing Market Index posted its second-biggest decline on record in July, with a measure of potential buyer flow falling below breakeven for a second in a row, according to a survey released Monday. Point 50 straight month. (Reporting by Dan Burns; Editing by Paul Simao)