In today’s construction news, learn about a spike in permits that revealed that the lack of available housing continued to boost new construction even if U.S. homebuilding fell to a more than three-year low in August as mortgage rates rose. Meanwhile, building permits for single-family homes increased at their quickest rate since May 2022, a sign of confidence in future demand. Finally, At a critical facility in central Romania where more than $100 million is being spent on projects aimed at expanding the U.S. Air Force’s presence in Southeast Europe, U.S. military officials celebrated the completion of a $34 million renovation on Tuesday.
US Housing Starts Dropped Three Years Ago
U.S. homebuilding fell to a more than three-year low in August as mortgage rates rose, while permits rose, suggesting a shortage of homes on the market.
Tuesday’s Commerce Department housing start decrease was the greatest in a year and widespread. After Monday’s data indicating homebuilders’ optimism dropped to a five-month low in September, more builders reduced prices and offered other incentives to attract customers.
The housing market, hardest hurt by the Federal Reserve’s vigorous monetary policy tightening, has benefited from home building and new home sales. Wednesday’s policy rate is expected to remain constant after the U.S. central bank boosted it 525 basis points since March 2022 to 5.25%-5.50%.
“August’s home construction data appear to be showing some cracks in the armor of what has been one of the few strong indicators in the housing market recently,” said Nationwide economist Daniel Vielhaber in Columbus, Ohio. However, the multifamily sector, which is notoriously volatile, contributed to the significant decrease in starts, so there may be noise.”
Last month, seasonally adjusted housing starts fell 11.3% to 1.283 million units, the lowest level since June 2020. Starts accelerated to 1.447 million units in July, down from 1.452 million.
According to Reuters economists, starts would fall to 1.440 million units.
Single-family housing starts, which make up most homebuilding, fell 4.3% to 941,000 last month. Hurricane Hilary slowed single-family homebuilding in the Northeast, Midwest, and West by 26.9%. It grew in the highly populated South.
A dearth of previously owned homes has bolstered demand for new construction, with homebuilding surging for most of this year and revitalizing the housing market. However, rising mortgage rates and U.S. Treasury yields are discouraging buyers. Freddie Mac reports that the 30-year fixed mortgage averages 7.18%, the highest since March 2002.
Homebuilder sentiment is also down. The National Association of Home Builders/Wells Fargo Housing Market Index fell below 50 in September for the first time in five months, according to a Monday study.
Stocks fell on Wall Street. The dollar sank versus a basket. As oil prices soared, U.S. Treasury yields rose amid concerns that inflation could reverse its recent decline.
Housing project starts with five or more units fell 26.3% to 334,000 in August, the lowest level since 2020. As increasing mortgage rates priced out homebuyers, multi-family dwelling building peaked in April 2022 due to rental demand.
With a lot of multi-family housing under development and tighter financial conditions, builders are having trouble getting loans.
Future homebuilding permits rose 6.9% to 1.543 million units, the most since October 2022. Multi-family housing permits rose 14.8% to 535,000 units. Single-family dwelling permits jumped 2.0% to 949,000, the highest since May 2022.
Residential investment has fallen for nine quarters, the longest stretch since the housing bubble burst, causing the 2008 global financial crisis and Great Recession.
Goldman Sachs economists lowered their third-quarter GDP growth estimate by 0.1% to 3.2% due to August’s homebuilding downturn. The second-quarter economy expanded 2.1%.
“The decline in starts in August overstates housing construction weakness, and we look for a reversal in September,” said Oxford Economics head U.S. economist Nancy Vanden Houten in New York.
Houses approved for development but not started rose 5.6% to 282,000. The single-family homebuilding backlog rose 2.9% to 142,00 units, while completions fell 6.6% to 961,000 units, the lowest since January 2022.
Housing under construction decreased 0.2% to 1.688 million units. The inventory of single-family housing under construction fell 0.1% to 676,000 units, the lowest since May 2021.
Multi-family housing under construction fell 0.2% to 995,000 units, still at record highs, showing limited room for additional growth despite rising building permits.
Realtors expect 1.5 million to 1.6 million new starts and completions per month to close the inventory gap.
“The undersupply of single-family homes on the market could provide growth opportunities for home builders, especially those building entry-level homes for millennials,” said LPL Financial chief economist Jeffrey Roach in Charlotte, North Carolina.
Permits Rise as Home Construction Falls to 2020 Low
New US home construction fell to its lowest level since June 2020 in August, indicating housing affordability issues.
Last month, residential starts fell 11.3% to 1.28 million, according to government data released Tuesday. Falling multifamily construction drove the downturn.
To estimate future building, 1.54 million applications were received. The most in nearly a year. The fastest pace of one-family housing permits since May 2022 suggests future demand.
Recent mortgage rate hikes have lowered house affordability to record lows, reducing demand. Homebuyer mortgage applications are at record highs, and it’s unclear when borrowing costs will fall.
Builder morale has plummeted to a five-month low as more Americans cannot afford homeownership. However, with little existing-home inventory, builders can attract more buyers.
Eliza Winger, Bloomberg analyst, said multifamily apartments dominated August housing permits as mortgage rates above 7% force many prospective buyers out of the single-family house market.
The lowest level of multifamily building since the pandemic occurred while applications for those projects rose nearly 16%, the most in over a year.
Housing starts fell in all regions except the Northeast, with the West falling the most. Oxford Economics noted that Hurricane Hilary, which hit California last month, was likely to blame.
Later this month, existing- and new-home sales data will shed light on the US housing market.
US Military Development at Romania’s Main Air Base Complete
Original Source: US military construction project finished at key air base in Romania
U.S. military authorities completed a $34 million upgrade to a critical site in central Romania on Tuesday. More than $100 million is being spent on programs to expand the Air Force’s reach in southeastern Europe.
The U.S. Army Corps of Engineers said Tuesday that Air Base 71, commonly known as Campia Turzii, will get a new squadron operations facility, aircraft hangar, and parking apron.
The Corps claimed the operations building will be a “nerve center” for base missions.
A 14,000-square-foot aircraft hangar was built to house extra NATO planes.
“These projects help ensure the base can support U.S. and NATO aircraft and crews,” the statement stated.
The Pentagon is focusing on Romania to expand Black Sea activities.
The base’s $100 million construction program includes Campia Turzii and nine additional projects.
Another $220 million is being spent on other Romanian locations, including a Cincu training field and Mihail Kogalniceanu Air Base, the U.S. military’s primary center.
The Romanian projects “contribute to the readiness and responsiveness of U.S. forces in Europe” and “reinforce the collective defense and security of NATO allies,” said Corps Europe district chief of engineering and construction Roger Vogler Tuesday.
The U.S. European Command’s European deterrence project funds the efforts to protect NATO territory against Russian aggression.
Air Force fighter planes have rotated to Campia Turzii in recent years, but the U.S. and allies needed modifications to increase operations.
When seeking financing for the projects in 2020, the Air Force stated it would be constrained in what it could send to the facility without the improvements.
Along with fighter jets, the Air Force flies MQ-9 Reaper drones from Campia Turzii, providing partners with observation near Romania’s border with Ukraine.
Romanian air force Brig. Gen. Miclos Catalin-Eugen, Turzii’s commander, said the changes show the base’s progress, where “everything is becoming better and better.”
Summary of today’s construction news
In summary, Realtors predict that in order to close the inventory gap, housing starts and completion rates will need to be between 1.5 million and 1.6 million units per month.
Meanwhile, According to Eliza Winger, a Bloomberg analyst, “multifamily units drove the increase in housing permits in August as mortgage rates above 7% push many prospective buyers out of the market for single-family homes.”
Finally, The commander of Turzii, Brig. Gen. Miclos Catalin-Eugen of the Romanian Air Force, stated that the advancements are evidence of the base’s development, where “everything is getting better and better.”