NEW YORK–New residential construction and the number of permits issued for building homes both fell in May.
National data show the number of housing starts declined for the second month in a row in May, dropping 14.4% from April and 3.5% from the year before. The declines occurred in both single-family and multi-family new home construction.
Not surprisingly, the boost in interest rates by the Fed and the fact the national average on the 30-year fixed-rate mortgage recently passed 6% have caused sentiment among the nation’s builders to fall.
"Housing starts slowed in reaction to these factors, as well as in light of persistent supply chain issues," Kelly Mangold of RCLCO Real Estate Consulting told CNN.
Pent-up Demand Remains
Nevertheless, Mangold told CNN the strong job market and the fact Millennials are still starting families indicate there is likely still pent-up demand for housing, she said. But, given the high prices and higher mortgage rates, she added in the interview, many buyers are still hesitant to jump into the market.
"Some may be taking a more 'wait-and-see' stance until conditions settle down," she said.
According to the National Association of Home Builders, homebuilder sentiment declined for the sixth month in a row in June.
Perhaps a Bright Spot
Data from the Mortgage Bankers Association show applications to purchase new homes in May fell 4% from April and 5% from one year earlier.
Hannah Jones, an economic data analyst at Realtor.com, told CNN there are signs home price acceleration is beginning to slow.
"Should home completions ramp up, buyers will see some relief in the form of increased housing supply," she told the news outlet. "Despite lower near-term housing demand, the need for new construction remains pressing to close the sizable decade-long housing supply gap and create a more favorable environment for buyers."
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