Mortgage demand hits lowest level since 1995 as new construction rebounds

Published

1 year ago

October 26, 2023

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US single-family homebuilding rebounded in September, boosted by demand for new construction amid an acute housing shortage, but the highest mortgage rates in nearly 23 years could slow momentum and delay the overall housing market recovery.

That was flagged by other data on Wednesday showing applications for loans to purchase a home plunged last week to levels last seen in 1995. In addition, the jump in housing starts partially recouped the decline in August.

The rebound in homebuilding probably reflected permits approved several months ago before mortgage rates broke above 7%. A survey this week showed confidence among single-family homebuilders slumped to a nine-month low in October, with builders reporting lower levels of traffic.

“In the very short-term, single-family construction activity is likely to increase with permits rising in every month of 2023 thus far, but at some point mortgage rates are likely to put a lid on new construction activity for home purchase,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.

Single-family housing starts, which account for the bulk of homebuilding, increased 3.2% to a seasonally adjusted annual rate of 963,000 units last month, the Commerce Department said. Data for August was revised to show starts dropping to a rate of 933,000 units instead of 941,000 units as previously reported.

Single-family starts rose in the Midwest, West and the densely populated South, but plunged 19.0% in the Northeast.

The housing market had shown signs of stabilizing before mortgage rates resumed their upward trend late in the summer, with the rate on the popular 30-year fixed mortgage vaulting above 7% in August. According to the Mortgage Bankers Association, the average contract interest rate on a 30-year fixed-rate mortgage rose 3 basis points to 7.70% last week, the highest since November 2000.

Mortgage rates have risen in tandem with the yield on the benchmark 10-year Treasury note, which has spiked to more than a 16-year high, mostly because of expectations that the Federal Reserve will keep interest rates higher for longer in response to the economy’s resilience. Since March 2022, the central bank has raised its benchmark overnight interest rate by 525 basis points to the current 5.25%-5.50% range.

Residential investment has contracted for nine straight quarters, the longest such stretch since the housing market bubble burst, triggering the 2008 global financial crisis and the Great Recession. That downturn probably extended into the third quarter, though overall gross domestic product growth last quarter was likely the fastest since late 2021, thanks to a tight labor market that is underpinning consumer spending.

Stocks on Wall Street were trading lower amid mounting tensions in the Middle East. The dollar rose against a basket of currencies. U.S Treasury prices fell, with the yield on the 10-year bond rising to the highest level since July 2007.

Financial markets expect the Fed will leave rates unchanged at its Oct. 31-Nov. 1 policy meeting, according to CME Group’s FedWatch Tool, given the surge in Treasury yields.

Starts for housing projects with five units or more soared 17.1% to a rate of 383,000 units in September. Overall housing starts accelerated 7.0% to a rate of 1.358 million units in September. Economists polled by Reuters had forecast starts rebounding to a rate of 1.380 million units.

Permits for future construction of single-family homes rose 1.8% to a rate of 965,000 units, the highest since May 2022. Though permits are a leading indicator, economists cautioned against being too optimistic about homebuilding prospects, citing the soaring mortgage rates and souring builder sentiment.

“It’s not lights out for homebuilding, but we don’t know how many more body blows with the Fed’s interest-rate hammer the nation’s housing sector can withstand,” said Christopher Rupkey, chief economist at FWDBONDS in New York.

Entertainment

MTV EMAs red carpet: Stars arrive in Manchester ahead of ceremony

Published

2 hours ago

November 10, 2024

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MTV EMAs red carpet: Stars arrive in Manchester ahead of ceremony

Music stars have hit the red carpet in Manchester for the MTV Europe Music Awards.

Taylor Swift leads the nominations this year, with singers including Sabrina Carpenter, Raye, Charli XCX, Beyonce, Coldplay and Eminem also up for prizes.

It is the first time the MTV event, which was cancelled last year amid security concerns, has taken place in the UK since 2017, when it was held in London.

Manchester is well represented, with DJ Paulette, Blossoms, and Happy Mondays stars Shaun Ryder and Bez among the guests.

Here are the pictures as they come in from the red carpet.

US

Donald Trump’s top team: Who is in, who is out and who are the leading contenders?

Published

2 hours ago

November 10, 2024

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Donald Trump's top team: Who is in, who is out and who are the leading contenders?

As the dust settles on Donald Trump’s US election win, the president-elect has begun choosing who will be in his administration for his second stint in the White House.

During the campaign, Mr Trump avoided directly confirming any appointments but frequently dropped hints about who he would like in his top team.

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So who is in, who is out and who are the leading contenders for jobs?

Who is in?

Susie Wiles

Susie Wiles is a veteran Republican campaign manager – having helped Ronald Reagan and Ron DeSantis get elected as well as Donald Trump in 2016 and 2024. She is the first member of his team to be announced – and becomes the first female chief-of-staff in American history.

The 67-year-old, who lives in Florida, has a political career that spans decades but has largely kept out of the limelight and rarely given interviews.

She is the daughter of late American footballer Pat Summerall and one of her first jobs in politics was as an assistant to one of his former New York Giants teammates when he became a Republican representative.

Outside politics, she has worked in the private sector as a lobbyist, for both Ballard Partners, whose clients include Amazon, Google, and the MLB (Major League Baseball), and then Mercury, which works with Elon Musk’s SpaceX and the Embassy of Qatar.

This time around, Mr Trump credited her with his “best-run” presidential campaign, describing her as “incredible” at a Milwaukee rally earlier this year, and an “ice maiden” in his victory speech.

Who is out?

Nikki Haley

Ms Haley was once Mr Trump’s main rival during his run for the Republican presidential nomination.

Despite losing the contest, she proved her popularity with parts of the GOP and previously served in his first presidential cabinet as the US ambassador to the United Nations.

The 51-year-old also served as governor of South Carolina but news of her not being involved this time around was broken by the president-elect on his own social media platform, Truth Social.

In a short statement, Mr Trump said he would not be inviting either her nor former secretary of state Mike Pompeo back but thanked them for their service.

In response, Ms Haley, who eventually endorsed Mr Trump despite harshly criticising him in the party primaries, said: “I was proud to work with President Trump defending America at the United Nations.

“I wish him, and all who serve, great success in moving us forward to a stronger, safer America over the next four years.”

Mike Pompeo

Mr Pompeo also served as the director of the CIA under Mr Trump and had been mentioned in some reports as a possible defence secretary or in relation to another role linked to national security, intelligence or diplomacy.

Mr Trump confirmed Mr Pompeo would not be returning to his cabinet in the same post that he ruled out Ms Haley.

Previously among Mr Trump’s closest allies, Mr Pompeo is one of the fiercest US defenders of Ukraine.

Mike Waltz, a congressman from Florida, and Tom Cotton, a Harvard College and Harvard Law School-educated Army officer-turned-senator from Arkansas, are also believed to be in the running for the defence role.

Who is yet to be decided?

Elon Musk

Tech billionaire Elon Musk became one of Mr Trump’s staunchest supporters in the months leading up to the election and spent at least $119m (£92m) canvassing for him in the seven battleground states.

His loyalty looks set to be rewarded as Mr Trump has promised the X owner a role as the head of a new Department of Government Efficiency (or DOGE for short, a reference to the Dogecoin cryptocurrency Mr Musk often promotes).

The department would be “tasked with conducting a complete financial and performance audit of the entire federal government”, Mr Trump said at an event in September.

It could give the billionaire the power to slash through the US federal bureaucracy both he and Mr Trump say has long held America back.

Robert F Kennedy Jr

Robert F Kennedy Jr abandoned his independent presidential campaign to back Mr Trump in August.

It was a move that saw the prominent vaccine sceptic condemned by many members of his family, but as with Musk, his public support looks set to be rewarded by the president-elect.

Mr Trump has pledged to give him a role focusing on health policy and Mr Kennedy has hinted at one possible initiative, stating on X that “the Trump White House will advise all US water systems to remove fluoride from public water”, on inauguration day.

Mr Kennedy – the son of politician Robert F Kennedy and the nephew of assassinated president John F Kennedy – made a name for himself as a vaccine sceptic during the COVID-19 pandemic and has frequently repeated debunked claims, including linking vaccines to autism in children.

Don Jr, Eric and Lara Trump

Mr Trump’s daughter and son-in-law, Ivanka Trump and Jared Kushner, were among his senior advisers during his first term. But will the businessman once again keep any family members close when he is in the Oval Office?

In June 2023, Mr Trump said he did not want his children to serve in a second administration, saying it was “too painful for the family”.

Nevertheless, while Ms Trump and Mr Kushner have stayed away from politics since, two of Mr Trump’s other sons – Don Jr and Eric – have played prominent roles on the campaign trail.

Eric’s wife, Lara Trump, already has a significant role in US politics, as she serves as co-chair of the Republican Party.

Richard Grenell

Among Mr Trump’s closest aides on foreign policy, Richard Grenell is thought to be a potential pick for national security adviser.

His private dealings with foreign leaders and often caustic personality have made him into a controversial figure, but he could well be part of Mr Trump’s second administration.

Mr Grenell has in the past supported establishing an autonomous zone in eastern Ukraine to end the war, an idea that Kyiv rejected as unacceptable.

Larry Kudlow

Fox News personality Larry Kudlow served as director of the National Economic Council for much of Mr Trump’s first term and is said to have an outside shot at becoming his treasury secretary this time around.

Other names being linked to the post include John Paulson – a billionaire hedge fund manager and donor, who hosted a fundraiser that raked in more than $50m (£38m) for the former president.

Marco Rubio

Marco Rubio, a Florida senator who unsuccessfully ran against Mr Trump to be the Republican’s presidential candidate in 2016, is a potential candidate for secretary of state.

His policies are very much in line with Mr Trump’s and he was a contender to be his 2024 running mate before JD Vance landed the role.

Bill Hagerty – another of the running mate contenders – is also being linked to the position, as is Robert O’Brien, who served as Mr Trump’s fourth and final national security adviser during his first term.