A slowdown in the construction sector is recorded on USAwith evidence suggesting that the highest interest rates at housing loans are now beginning to burden a significant part of the economy.
US new home construction falls 11% in August, at the lowest level since June 2020, also contradicting economists’ estimates. The sharp slowdown comes as the average mortgage rate continues to hover above 7%.
The data shows that high interest rates, promoted as an antidote to inflation, are starting to hit sectors of the economy that were characterized as particularly resilient.
“THE sharp decline in housing is alarmingbecause housing has been one of the pillars of the economy that has proven particularly resilient and even more so than expected,” Independent Advisor Alliance Chief Investment Officer Chris Zaccarelli told Insider.
“If this turns out to be the first crack in an otherwise bulletproof sector, then the assessment of the strength of the US economy could changereinforcing the narrative of an economy that is vulnerable and prone to recession,” he added.
With rising interest rates, buying a home has become a much more difficult affair than it was just a few years ago. It is indicative that many prospective home buyers canceled the agreements at the last minute. According to the data, around 16% of sales agreements were canceled in August.
Jaime Moore, a real estate agent with Redfin, points out that “in the last six months he has seen more buyers cancel deals than at any other time in his 24-year real estate career.”
And the decline in housing markets coincided with a decline in the construction sector, which in September hit its lowest level since April.
Perhaps the only sign of hope is that according to August figures housing permits increased by 7%. This means there could be an uptick in new home construction in the coming months if those permits eventually go ahead with building work.
Source: News Beast
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