00:00 Brad
US housing starts slowing in January as builders pull back on construction amid fears and growing fears over high mortgage rates, affordability challenges, and unsold homes. New construction fell nearly 10% to an annual rate of 1.37 million homes, falling short of Wall Street’s estimates. Here with more on the state of the housing market, we’ve got Danielle Hale, who is the chief economist at realtor.com here. Great to have you back on the program. So first, just walk us through some of the dynamic here that we’re seeing in new construction.
00:49 Danielle Hale
Yeah, thanks for having me, Brad. So, in the new construction market, as you mentioned, there’s some uncertainty that builders are experiencing right now, and we see that reflected in the data with that pullback in starts. Now, there are a couple of good things happening in that data. One is that completions ticked higher. So builders seem to be in get-it-done mode, trying to close out construction projects that are already underway. That will near-term boost supply, which will be good for buyers, but will make it a little bit more challenging because we’ll have to compete with each other to, um, to get rid of and to sell that inventory. Looking further ahead, as you noted, starts are down. Uh, it was pretty much in both single-family and multifamily types. But, uh, looking at the permit data, which is about what is, you know, even further into the future, we saw that that data was roughly flat. So not quite as bad as, uh, you might expect given the concerns that builders have about buyer traffic and tariffs and costs down the road, but they’re sort of taking a wait-and-see approach. Getting the permits, holding some optimism for the future, but not quite moving forward with projects perhaps until they get a little bit more certainty.
02:33 Brad
And so with that, there is the uncertainty of what the cost could be because we’re already at some of the record high prices. And so now, if we did see even more costs that have to get passed through to potential buyers, how are we essentially running the calculus on how much higher the costs could go for potential buyers as well?
03:10 Danielle Hale
Yeah, I think costs have actually been a challenge for home shoppers in the market. Uh, new homes have done a better job of being flexible. So builders have targeted smaller footprint homes to help bring down those costs, but if their costs rise, as tariffs go up, or if it’s harder for them to find workers to build those homes, they’re certainly going to try to pass those costs onto consumers. And with mortgage rates remaining very close to that 7% horizon, it’s going to be challenging for them to do so. So I do think that puts builders in a challenging position, and that’s why we see some of that hesitation in the starting activity.