Housing starts increase as housing market sends mixed signals

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The number of housing starts ticked up in July despite rising mortgage rates, adding to the mixed signals regarding the health of the market.

Housing starts measure the change in the number of new residential buildings that began construction. Starts rose 3.9% from June to this past month, according to a Wednesday report from the Census Bureau. They are at a seasonally adjusted annual rate of 1.452 million. From July 2022, they rose 5.9%.For permits to build, which are seen as a proxy for future construction, the seasonally adjusted annual rate of new permits last month was 13% below the rate in July last year.

The housing market was smoldering hot through much of the pandemic because the Fed cut interest rates to near-zero levels, resulting in ultra-low mortgage rates for homebuyers. Those historic rates spurred a massive wave of demand, and as a result, prices rose, and construction took off. In particular, buyers have been pushed into the market for new homes because existing home inventory is so low. The buyers who locked in those sub-3% mortgage rates are holding on to their homes and avoiding putting them on the market because they got such a good deal — meaning that prospective buyers must turn to new homes.

 

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