The number of housing starts ticked up in June despite pressure from high mortgage rates, reassuring news for an economy that has seen soaring housing prices and rents driven by a lack of supply.
Housing starts, the change in the number of new residential buildings that began construction, rose 3% from May to a seasonally adjusted annual rate of 1.35 million in June, according to a Wednesday morning report from the Census Bureau.
From June 2023, they increased by 4.4%.
For permits to build, which are seen as a proxy for future construction, the rate of new permits last month was 3.1% below the rate in June of last year.
As of this week, the average rate on a 30-year, fixed-rate mortgage was 6.8%, according to Mortgage News Daily, which tracks daily changes in rates. That is down from a recent peak of above 8%, although is still far higher than in the years prior to the pandemic.
At the peak of the pandemic, the Federal Reserve cut its interest rate target to near zero, and mortgage rates plunged to ultralow levels. At one point in early 2021, people were locking in 2.5% mortgages — the lowest level in postwar modern history.
The low rates prompted an explosion of homebuying and investment, generating a surge in home construction. But then, the dynamic began shifting fast when inflation increased and the Fed hiked interest rates in response, thus pushing mortgage rates to the highest level since the turn of the century.
New home sales fell 11.3% from April to a seasonally adjusted annual rate of 619,000, according to the most recent report from the Census Bureau. The number of new home sales is 16.5% lower than it was in May of last year.
Existing home sales in May slowed 0.7% to a seasonally adjusted annual rate of 4.11 million, the National Association of Realtors reported recently. The pace of existing home sales is down nearly 3% from the year before.
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Housing affordability has been a major concern for consumers. This week, President Joe Biden pushed for Congress to make it so corporate landlords have to cap rent increases on existing units at 5% or lose prized tax breaks.
The move has little chance of passing in a divided Congress but shows that addressing housing affordability is a priority during this election cycle.
