More Housing Completions For Better Mortgage Rates

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More Housing Completions For Better Mortgage Rates

Jan 29, 2023 | News | 0 comments

Housing completions continued to be slow in December according to the Census Bureau’s housing starts report and in this year’s housing market, we’re running out of time since homebuilding permits are set to fall until contractors get rid of excess inventory.

Purchase application data are up, builder confidence is higher than expected, and 10-year yields and mortgage rates are lower — which is good news for the housing market. Despite the headline number beating estimates, housing starts are still grinding and not yet breaking out, which means the internal numbers aren’t great either.

Inflation can be best dealt with by increasing supply, not by destroying demand, which in turn will ruin production. In this housing cycle, we have been fortunate to have builders with a backlog of orders to fulfill and put on the market. After that, we don’t have anything else to add, since housing permits can fall all year long.

According to housing data analyst and financial writer Logan Mohtashami, in the last economic expansion, he does not believe the builders were underbuilt. According to him, the previous expansion was based on the assumption that the housing recovery would be weakest in history between 2008 and 2019, and that we would not open 1.5 million housing starts a year until 2020-2024, when demand would finally warrant that level of construction.

From 2013 to 2015, new home sales fell short of expectations. For 30 months in 2018, the new home sales market was plagued with a monthly supply spike, which kept builders from building more homes.

As Motashami noted, the builders are not running charities, they need to make money, and they will never undermine their business models by oversupplying the market. He hopes that completion data will grow as fast as possible by 2023 since that’s the end of the pipeline.