The U.S. Census Bureau will publish is monthly estimate of new housing starts Tuesday, with investors looking for a modest decline in construction as mortgage rates remain near multi-decade highs and the job market shows signs of cooling into the autumn months.
August housing starts are likely to slip modestly from July, according to economists’ forecast, to an annual run rate of around 1.44 million units , with a similar rate expected for permits for new construction, a good indicator of near-term housing demand.
Housing starts had improved over the past year thanks in part to a consistent rise in new home sales, which have outpaced existing home sales as owners, locked into low mortgages, are reluctant to sell and refinance into a much higher rate.
July new home sales hit a 17-month high, in fact, rising 4.4% to an annualized rate of 714,000 as mortgage rates nudged past 7$ to the highest levels since 2001.
However, that relentless rise in mortgages costs, tied to the Federal Reserve’s inflation fight, looks to have taken its toll on market sentiment, according to the National Association of Homebuiders.
The NAHB’s closely-tracked survey of builder confidence fell six points to a six-month low of 45 points in September, and fell through the breakeven 50-point mark for the first time in five months.
“The two-month decline in builder sentiment coincides with when mortgage rates jumped above 7% and significantly eroded buyer purchasing power,” said NAHB Chairman Alicia Huey. “And on the supply-side front, builders continue to grapple with shortages of construction workers, buildable lots and distribution transformers, which is further adding to housing affordability woes. Insurance cost and availability is also a growing concern for the housing sector.”
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