Single-family real estate rebounds in November 2024, Real Estate News, ET RealEstate

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WASHINGTON: U.S. single-family home construction rebounded in November as the impact of hurricanes eased, but the threat of tariffs on imported goods and potential labor shortages due to Mass expulsions of immigrants could hamper new construction next year.

The Commerce Department’s report released Wednesday showed only a slight increase last month in permits for future single-family home construction, suggesting residential investment likely won’t contribute much to economic growth in the fourth quarter. .

Rising mortgage rates, even as the Federal Reserve has reduced borrowing costs, remain a constraint on the housing market, with promised rates and President-elect Donald Trump’s deportations of undocumented immigrants making the situation worse.

The U.S. central bank announced a third straight rate cut on Wednesday, but forecast only two reductions in borrowing costs next year, down from the four it predicted in September, citing continued economic resilience.

There are also concerns that some of the new Trump administration’s policies may be inflationary.

“We are less optimistic about the outlook because we believe Donald Trump’s proposed trade and immigration policies will weigh on the supply capacity of home builders,” said Bradley Saunders, North America economist. at Capital Economics.

Single-family housing starts, which account for the bulk of home construction, jumped 6.4% to a seasonally adjusted annual rate of 1.011 million units last month, the Census Bureau said. Department of Commerce.

Residential construction has struggled for much of this year after benefiting from a severe shortage of used homes for sale. Although the Fed began cutting interest rates in September, the average rate on the popular 30-year fixed-rate mortgage remains near 7%, tracking yields on the 10-year U.S. Treasury, which rose in due to the resilience of the economy and concerns about the new administration’s policies. will fuel inflation.

The Fed’s policy rate has now been cut by 100 basis points and is now in the range of 4.25% to 4.50%. It was increased by 5.25 percentage points between March 2022 and July 2023.

“Our Treasury strategists only expect 10-year rates to fall by about 15 basis points by the end of next year, suggesting limited room for mortgage rate reductions.” , said Abiel Reinhart, economist at JPMorgan.

“At the same time, the possibility of less net immigration could reduce household growth, while also reducing the availability of labor in the construction sector.”

Stocks on Wall Street fell following the Fed’s rate projections. The dollar rose against a basket of currencies. U.S. Treasury yields rose.

A National Association of Home Builders survey released Tuesday showed homebuilder confidence held at a seven-month high in December on hopes of an easing of construction regulations. from the Republican Trump administration. Economists, however, have warned of even higher lumber prices and severe labor shortages if Trump implements his trade and immigration policy proposals.

The United States imports large quantities of lumber from Canada, the primary raw material used in residential construction. Trump announced he would impose 25% tariffs on all imports from Canada and Mexico.

President Joe Biden’s administration this year increased tariffs on imports of Canadian softwood lumber products from 8.05% to 14.54%.

“Many residential construction regulations are imposed at the state and local level,” said Nancy Vanden Houten, chief U.S. economist at Oxford Economics. “Foreign-born workers who are not citizens make up approximately 18% of the construction industry workforce.”

Groundbreaking for single-family housing projects rebounded 18.3% in the densely populated South after being depressed by Hurricanes Helene and Milton in October.

Single-family housing starts, however, declined in the Northeast, Midwest and West.

Construction of single-family homes fell 10.2% from a year ago.

Multifamily housing starts plunged 24.1% to a pace of 264,000 units, the lowest level since March. Overall, housing starts fell 1.8% to a rate of 1.289 million units.

Economists polled by Reuters expected housing starts to rise at a rate of 1.343 million units. Housing starts fell 14.6% from a year ago.

Permits for future single-family housing construction increased 0.1% to 972,000 units in November. Single-family housing permits increased 1.8% in the South. They declined in the Northeast and West, but remained unchanged in the Midwest.

Building permits for multi-family buildings climbed 22.1% to reach 481,000 units. Building permits as a whole jumped 6.1% to 1.505 million units. They fell by 0.2% compared to a year ago.

Residential investment weighed on GDP for two consecutive quarters. The Atlanta Fed forecasts GDP growth of 3.2% at an annualized rate in the fourth quarter. The economy grew at a pace of 2.8% in the July-September quarter.

The number of homes approved for construction that have yet to begin increased 6.1% to 295,000 units last month.

The backlog in single-family home construction increased 0.7% to 144,000 units. The completion rate for this housing segment increased 3.3% to 1.038 million units.

Overall housing completions fell 1.9% to a rate of 1.601 million units. The number of homes under construction fell 1.8% to 1.434 million units.

The stock of single-family housing under construction decreased 0.8% to 637,000 units, its lowest level since March 2021.