Paul Blow

November 2022 may well go down as a new low-water mark for the U.S. home building economy. The average rate for a 30-year, fixed-rate mortgage peaked at 7.08%, driven largely by four successive 75-basis-point (bp) interest rate hikes by the Federal Reserve. Builder confidence in the market for newly built single-family homes as measured by the NAHB/Wells Fargo Housing Market Index declined for an 11th straight month, and research from indicated that the country was facing a housing shortage of some 5.24 million homes, an increase of more than 36% (and approximately 1.4 million additional homes) from just three years prior.

Jerry Konter, NAHB 2022 chairman and owner of Savannah, Georgia–based Konter Quality Homes, used the occasion to officially declare the housing sector in recession, pointing to weakened demand and increasingly scarce buyer traffic as warning signals that the federal government needed to address an emerging bear market with “policies that lower the cost of building and allow the nation’s home builders to expand housing production.”

By year’s end, the Fed had eased pressure on interest rates with a smaller, 50-bp increase in December, in a hopeful signal that efforts to moderate and contain inflation were taking hold, but the cumulative damage of a 4.25% increase to rates on the year had already taken its toll: Designed to cool inflation by curtailing both borrowing and spending, interest rate increases counted the housing economy among its collective collateral damage, and the pace of sales hit lows not seen since the housing crisis over a decade earlier.

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