New U.S. home construction continued to decline in November and permits plunged as high borrowing costs paired with widespread inflation eroded housing affordability and demand.
Residential starts decreased 0.5% last month to a 1.43 million annualized rate, according to government data released Tuesday. Single-family homebuilding dropped to an annualized 828,000 rate, the lowest since May 2020.
Applications to build, a proxy for future construction, decreased 11.2% to an annualized 1.34 million units. Permits for construction of one-family homes fell 7.1% to the weakest pace since 2020.
The sustained slide in new construction underscores how this year's surge in mortgage rates has stifled buyer demand and weighed on the broader housing market. Meantime, high costs for labor and construction materials have made it even more challenging for builders to preserve margins while employing incentives to lure buyers.
Mortgage rates have since come off their highs, but borrowing costs are still double what they were last year. And with further interest rate increases expected by the Federal Reserve next year plus the potential of a recession, the housing market will likely stay weak into next year.
Builder Sentiment
Multifamily starts increased, while permits for new construction declined to a more than one-year low.
Groundbreakings on single-family homes dropped in the South and Midwest, while permits declined in three of four regions.
Meanwhile, the number of homes completed jumped nearly 11% to an annualized 1.49 million, the highest since August 2007 and a sign builders are making greater progress on backlogs amid a demand pullback.
Existing-home sales for November will be released Wednesday, followed by data Friday on new-home purchases.
