The housing market in the U.S. is struggling right now, like many other global markets. In June, new house construction in the U.S. dropped to a nine-month low. On Tuesday, the Commerce Department announced that housing starts sank by 2% last month alone and at a seasonally adjusted annual pace of 1.559 million units, making it the lowest level since September 2021.
The housing market is extremely sensitive to interest rates. This year has seen a notable softening due to the Federal Reserve’s aggressive rate hikes to combat inflation, which is at its highest level in forty years. This rate change comes when high mortgage rates significantly decrease house buyers’ affordability. Permits for new construction projects are also slipping.
Mortgage rates have continued to increase this year due to inflation at nearly an all-time high. Last month, mortgage rates jumped over 5%. This has made purchasing homes difficult for everyone, especially first-time buyers. Mortgage rates will likely remain high until the year’s end, which will not help the dwindling housing market.