New Construction Falls to Lowest Level Since 2020

The U.S. saw a drop in new home construction in January. It was the lowest level since 2020.

Start building your own home According to Thursday’s Commerce Department data, the rate of annual growth fell 4.5% last month to 1.31 Million units. This is lower than the pace predicted by Refinitiv economists of 1.35million units.

Applications to build – which measures future construction – were little changed at an annualized rate of 1.34 million units. The 1.8% drop in permits for single-family homes, the largest share of homebuilding, was due to a decline of 1.8%.

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Single family home in construction, Berlin, N.J. Dec. 25, 2022 (Fox News)

This data is one day after the National Association of Home Builders/Wells Fargo Housing Market Index rose to 42, which was the highest reading since September. Any reading above 50 is considered positive; prior to 2022, the gauge has not entered negative territory since 2012, excluding a brief – but steep – drop in May 2020. 

While the index is half its level one month ago (81), it has increased from 31. It peaked at a 35-year high of 90 in November 2020, buoyed by record-low interest rates at the same time that American homebuyers – Flush with cash and eager for more space during the pandemic – started flocking to the suburbs. 

The housing market, which is sensitive to interest rates, has taken the brunt. Federal Reserve’s For the slowdown of the economy and tightening policy, we are launching an aggressive campaign. 

This aerial view shows completed and under-construction new homes located on Trappe, Maryland. It was taken October 28, 2022.  (Photo by JIM WATSON/AFP via Getty Images / Getty Images

Policymakers already lifted the benchmark federal funds rate eight consecutive times – well into restrictive territory – and have indicated they plan to continue raising rates higher this year as they try to crush inflation that is still running abnormally high. 

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However, there are early signs that demand is returning. Mortgage rates continue to drop from November’s record high of 7.88%. 

The average rate to buy a 30-year fixed mortgage According to data provided by Freddie Mac, rates dropped to 6.12% last Thursday. This is still a significant increase from the rate of 3.69% a year ago.

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