Builders Hit the Brakes on New Homes

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What's Happening Today

Weakening demand has soured homebuilders' outlook on the housing market, and it shows in residential construction activity in November, according to today's Census Bureau report.

While the number of new homes that started construction in November was only down 0.5% from October, it declined 16.4% from November 2021. That's more homes than economists expected, but it's the third month in a row that the measure has fallen.

While no one has a crystal ball that shows the future of the new homes market, the 11.2% dive that residential building permits took from October to November also indicates far fewer homes might be built in the new year.

If you thought 2023 could be your year to purchase a newly built home, you might have a number of challenges to contend with. You may be facing a shortage of options, especially if you're looking for a single-family home in the Midwest, where new home builds dropped more than the national average. That's not to mention your interest on a mortgage will likely be even higher than it would be now, as the Federal Reserve has pledged to continue raising interest rates.

Existing homes may not be a better bet either. Tomorrow we will get a snapshot of that segment of the housing market when the National Association of Realtors releases its November report. But with economists estimating that November was the 11th straight month of declines in existing home sales, you could face similar headwinds when looking for a pre-existing home.

- Taylor

Editors' Picks

Big US Banks Fall Short on Promises To Create Black Homeowners (Bloomberg)

Homebuying Got Less Diverse in 2022 (The Balance)

Congress Unveils $1.7 Trillion Deal To Fund Government, Avert Shutdown (The Washington Post)

Wells Fargo To Pay $3.7 Billion Over Consumer Banking Violations (The New York Times)

8 Bank Fees You Need To Stop Paying (The Balance)

How To Choose the Best Bank for Your Needs (The Balance)

A Year of Wild Swings in the Financial Markets (Reuters)

Term of the Day

FHA 203(k) Loans

FHA 203(k) loans make it possible for people to rehabilitate properties that need some help and turn them into homes. Sometimes the location is good and the property has potential, but you need to make a few significant improvements. Without those repairs, the home might not be suitable for living, and lenders might be unwilling to fund loans on a property with problems. These loans give homebuyers an incentive to take such properties off the market and make them a valuable part of the community again.

For example, say you're buying your first home and you're looking for a first-time homebuyer rehab loan. You could apply for a 203(k) loan to make the purchase and rehab the house.

Off the Charts

It's been tough getting into the housing market lately, and minority groups have been especially hard hit this year, according to data from the National Association of Realtors.