Home Fixed interest US housing starts fall to nine-month low in June

US housing starts fall to nine-month low in June

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Carpenters work on new townhouses that are still under construction as building material supplies are in high demand in Tampa, Florida, U.S., May 5, 2021. REUTERS/Octavio Jones

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July 19 (Reuters) – New home building activity in the United States fell to its lowest level in nine months in June and permits for new construction projects also fell, the latest indication of a slowdown housing market as soaring mortgage rates reduce affordability.

Housing starts fell 2% to a seasonally adjusted annual rate of 1.559 million units last month, the lowest level since September 2021, the Commerce Department said Tuesday. Data for May was revised upwards to a rate of 1.591 million units from the 1.549 million units previously reported.

Economists polled by Reuters had forecast housing starts to come in at a pace of 1.580 million units. Future housing permits fell 0.6% to a rate of 1.685 million units.

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The housing market is very sensitive to interest rates, and with the Federal Reserve raising rates aggressively to dampen inflation to its highest level in four decades, the market has weakened significantly this year. The average contract rate for a 30-year fixed-rate mortgage rose to nearly 6% in June from around 3.3% at the start of the year, putting home buying off the hook. reach for a growing number of potential buyers, especially first-time buyers.

While it is unclear how much mortgage rates will rise, it is almost certain that they will remain elevated for some time as the Fed prepares to raise interest rates again at its meeting this week. next and other increases to come until the end of the year.

An Oxford Economics index released last week showed homes were the least affordable in the first quarter of 2022 at any time since the 2007-09 financial crisis, and it predicted the situation would deteriorate for the rest of this year. .

Meanwhile, a survey released on Monday showed the National Association of Home Builders/Wells Fargo Housing Market Index suffered its second-biggest decline on record in July, with a traffic gauge of potential buyers falling. below the breakeven point of 50 for one second. months in a row. Read more

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Reporting by Dan Burns; Editing by Paul Simao

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