Gimme shelter: fewer homes being built as builders pull back

Dec 8, 2022, 12:21 PM | Updated: 12:29 pm
FILE - Houses under construction are seen in Mars, Pa., on May, 27, 2022. Homebuilders have pumped ...

FILE - Houses under construction are seen in Mars, Pa., on May, 27, 2022. Homebuilders have pumped the brakes on new single-family home construction this year, a trend that’s likely to extend into 2023, according to several forecasts. (AP Photo/Gene J. Puskar, File)

(AP Photo/Gene J. Puskar, File)

LOS ANGELES (AP) — Homebuilders have pumped the brakes on new single-family home construction this year, a trend that’s likely to extend into 2023, according to several forecasts.

Single-family housing starts were running at a seasonally adjusted annual pace of about 1.16 million properties in January, when the average rate on a 30-year mortgage hovered below 4%. By October, starts had slowed to a seasonally adjusted annual pace of 855,000, as long-term mortgage rates climbed above 7% for the first time in two decades, crushing many would-be homebuyers’ purchasing power.

The slowdown has single-family housing starts set to fall for the first time in 11 years, with another pullback likely in 2023.

Carl Reichardt, a homebuilding analyst at BTIG, forecasts that single-family housing starts will drop about 11% this year and double that in 2023, before climbing 5% in 2024.

A homebuilding industry forecast released this week by Fitch Ratings has a similar outlook, calling for a 10% in single-family housing starts this year and declines of 13% and 5% in 2023 and 2024, respectively.

“We expect 2023 to be a challenging year for U.S. homebuilders as persistent affordability issues will lead to housing demand continuing to weaken,” Robert Rulla, senior director at Fitch Ratings wrote in the report.

Single-family home construction had risen steadily since 2012, before surging during the first two years of the pandemic as ultra-low mortgage rates fueled demand.

“Now we’re getting a correction,” said Robert Dietz, chief economist at the National Association of Home Builders.

He predicts homebuilding will start to recover in 2024, and that mortgage rates will ease back from current levels to a range between 4.5% and 6% by 2025.

The average rate on a 30-year mortgage fell for the fourth week in a row this week to 6.33%, according to Freddie Mac. A year ago it was 3.1%.

Reichardt at BTIG cautions against drawing parallels between the last housing slump and this one, noting that in October the inventory of both previously occupied homes and new-construction properties is about half of what it was in October 2005, just after the historical peak in housing starts overall.

As such, Reichardt expects the housing market will avoid a “negative feedback loop” where lower prices cause more forced home sales and increase inventory — as long as there’s isn’t a significant increase in job losses.

Still, he’s expecting a 40% drop in homebuilders’ earnings per share next year due to the housing slowdown.

Homebuilder stocks are already down sharply this year as the housing slump deepened. But Reichardt recently raised his stock price targets and has “Buy” ratings on D.R. Horton, Lennar and PulteGroup.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

A man takes photos as a black plume rises over East Palestine, Ohio, as a result of a controlled de...
Associated Press

Residents kept out as air checked near derailed Ohio train

EAST PALESTINE, Ohio (AP) — It’s unclear when evacuated residents might be able to return home to the area where officials released and burned toxic chemicals from the wreckage of a derailed train, Ohio Gov. Mike DeWine said Tuesday. Residents near the site in East Palestine, close to the Pennsylvania line, were ordered beforehand to […]
8 hours ago
This image provided by Catalina María Gomez Caycedo shows Aleena Rupani, from left, Catalina Marí...
Associated Press

Gallup: Just 2 in 10 U.S. employees have work `best friend’

NEW YORK (AP) — Crystal Powers began a new job remotely in February 2022 as a medical records supervisor. She has yet to meet two of the five people who report to her in person and has found it challenging to bond with her fellow managers online. “I was used to that face-to-face of going […]
8 hours ago
FILE - Protesters hold signs as they march during a protest over the death of George Floyd in Chica...
Associated Press

How Candid hopes diversity data will help aid racial equity

Candid, the major philanthropy research group, is leading a coalition of funders and grantees that want to standardize the collection of demographic information to help target donations to minority-led groups. Harnessing such data could help advance racial equity, said Candid’s CEO, Ann Mei Chang, who is launching a nonprofit initiative to amass more such information. […]
8 hours ago
Associated Press

Bertelsmann subsidiary to end, sell dozens of magazines

BERLIN (AP) — German media group RTL Deutschland said Tuesday it will stop publishing 23 print magazines and seek to sell almost two dozen others, affecting about 700 jobs. The company is part of Bertelsmann, the German conglomerate that also owns Penguin Random House. RTL Deutschland said it wants to focus on core brands that […]
8 hours ago
Associated Press

Germany appoints central bank IT chief to head cybersecurity

BERLIN (AP) — The German government announced the appointment Tuesday of the European Central Bank’s head of IT systems to lead the national cybersecurity agency, months after her predecessor was removed following reports of possible problematic ties to Russia. Interior Minister Nancy Faeser said Claudia Plattner “brings the experience and expertise with her that we […]
8 hours ago
Associated Press

Millennial Money: Should unmarried couples have one account?

When a couple joins financial forces, it’s typically so they can accomplish a joint savings goal or contribute to shared expenses, such as those that come from living together. This is a typical step for married couples, but more unmarried couples are taking the plunge to combine households: The number of unmarried partners that live […]
8 hours ago

Sponsored Articles

...
Quantum Fiber

How high-speed fiber internet edges out cable for everyday use

In a world where technology drives so much of our daily lives, a lack of high-speed internet can be a major issue.
(Photo via MLB's Arizona Fall League / Twitter)...
Arizona Fall League

Top prospects to watch at this year’s Arizona Fall League

One of the most exciting elements of the MLB offseason is the Arizona Fall League, which began its 30th season Monday.
...
Children’s Cancer Network

Children’s Cancer Network celebrates cancer-fighting superheroes, raises funds during September’s Childhood Cancer Awareness Month

Jace Hyduchak was like most other kids in his kindergarten class: He loved to play basketball, dress up like his favorite superheroes and jump as high as his pint-sized body would take him on his backyard trampoline.
Gimme shelter: fewer homes being built as builders pull back