The surge in fixed mortgage rates, now hovering at 7.7% according to the Mortgage Bankers Association, is not just a deterrent for potential homebuyers but is also escalating the cost and availability of builder development and construction loans. This double-edged sword is exacerbating the housing affordability crisis.
The Federal Reserve’s prolonged monetary policy stance, unexpected macro growth in Q3, and long-term concerns regarding government budget deficits are also fueling the rise in interest rates.
NAHB chief economist Robert Dietz emphasized the urgent need for a remedy. “The housing affordability crisis can only be solved by adding additional attainable, affordable supply,” he said. “Boosting housing production would help reduce the shelter inflation component that was responsible for more than half of the overall Consumer Price Index increase in September and aid the Fed’s mission to bring inflation back down to 2%. However, uncertainty regarding monetary policy is contributing to affordability challenges in the market.”
Read more: US housing industry raises alarm on Fed’s monetary policies
In response to the prolonged high-interest environment, many builders have resorted to price reductions to stimulate sales. The data reveals that 32% of builders slashed home prices in October, a figure that mirrors the previous month and the highest rate since December 2022.
Source: mpamag.com