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.
An industry body has warned that the equivalent of more than one pub a day is set to close across Great Britain this year.
According to the British Beer and Pub Association (BBPA), an estimated 378 venues will shut down across England, Wales and Scotland.
This would amount to more than 5,600 direct job losses, the industry body warns. It has called for a reduction in the cumulative tax and regulatory burden for the hospitalitysector – including cutting business rates and beer duty.
The body – representing members that brew 90% of British beer and own more than 20,000 pubs – said such measures would slow the rate at which bars are closing.
BBPA chief executive Emma McClarkin said that while pubs are trading well, “most of the money that goes into the till goes straight back out in bills and taxes”.
“For many, it’s impossible to make a profit, which all too often leads to pubs turning off the lights for the last time,” she said.
“When a pub closes, it puts people out of a job, deprives communities of their heart and soul, and hurts the local economy.”
She urged the government to “proceed with meaningful business rates reform, mitigate these eye-watering new employment and EPR (extended producer responsibility) costs, and cut beer duty”.
“We’re not asking for special treatment, we just want the sector’s rich potential unleashed,” she added.
The government has said it plans to reform the current business rates system, saying in March that an interim report on the measure would be published this summer.
From April, relief on property tax – that came in following the COVID-19 pandemic – was cut from 75% to 40%, leading to higher bills for hospitality, retail and leisure businesses.
The rate of employer National Insurance Contributions also rose from 13.8% to 15% that month, and the wage threshold was lowered from £9,100 to £5,000, under measures announced by Rachel Reeves in the October budget.
A senior Israeli official has issued a less-than-optimistic assessment of the permanency of any ceasefire in Gaza.
Speaking in Washington on condition of anonymity, the senior official said that a 60-day ceasefire “might” be possible within “a week, two weeks – not a day”.
But on the chances of the ceasefire lasting beyond 60 days, the official said: “We will begin negotiations on a permanent settlement.
“But we achieve it? It’s questionable, but Hamas will not be there.”
Israeli Prime Minister Benjamin Netanyahu is due to conclude a four-day visit to Washington later today.
There had been hope that a ceasefire could be announced during the trip. US President Donald Trump has repeatedly stated that it’s close.
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Netanyahu arrives in US for ceasefire talks
Speaking at a briefing for a number of reporters, the Israeli official would not be drawn on any of the details of the negotiations over concerns that public disclosure could jeopardise their chances of success.
This was rejected by Hamas and by Trump’s Middle East envoy, Steve Witkoff, who reportedly told the Israelis that the redeployment map “looks like a Smotrich plan”, a reference to the extreme-right Israeli finance minister, Bezalel Smotrich.
The official repeated Israel’s central stated war aims of getting the hostages back and eliminating Hamas. But in a hint of how hard it will be to reconcile the differences, the official was clear that no permanent ceasefire would be possible without the complete removal of Hamas.
“We will offer them a permanent ceasefire,” he told Sky News. “If they agree. Fine. It’s over.
“They lay down their arms, and we proceed [with the ceasefire]. If they don’t, we’ll proceed [with the war].”
On the status of the Israeli military inside Gaza, the official said: “We would want IDF in every square meter of Gaza, and then hand it over to someone…”
He added: “[We] don’t want to govern Gaza… don’t want to govern, but the first thing is, you have to defeat Hamas…”
Image: Pic: Reuters
The official said the Israeli government had “no territorial designs for Gaza”.
“But [we] don’t want Hamas there,” he continued. “You have to finish the job… victory over Hamas. You cannot have victory if you don’t clear out all the fighting forces.
“You have to go into every square inch unless you are not serious about victory. I am. We are going to defeat them. Those who do not disarm will die. Those who disarm will have a life.”
On the future of Gaza, the official ruled out the possibility of a two-state solution “for the foreseeable future”.
“They are not going to have a state in the foreseeable future as long as they cling to that idea of destroying our state. It doesn’t make a difference if they are the Palestinian Authority or Hamas, it’s just a difference of tactics.”
On the most controversial aspect of the Gaza conflict – the movement of the population – the official predicted that 60% of Palestinians would “choose to leave”.
But he claimed that Israel would allow them to return once Hamas had been eliminated, adding: “It’s not forcible eviction, it’s not permanent eviction.”
Critics of Israel’s war in Gaza say that any removal of Palestinians from Gaza, even if given the appearance of being “voluntary,” is in fact anything but, because the strip has been so comprehensively flattened.
Reacting to Israeli Defence Minister Katz’s recent statement revealing a plan to move Palestinians into a “humanitarian city” in southern Gaza, and not let them out of that area, the official wouldn’t be drawn, except to say: “As a permanent arrangement? Of course not.”
The first thing you notice when immigration officers stop a possible illegal moped delivery driver is the speed in which the suspect quickly taps on their mobile.
“We’re in their WhatsApp groups – they’ll be telling thousands now that we’re here… so our cover is blown,” the lead immigration officer tells me.
“It’s like a constant game of cat and mouse.”
Twelve Immigration Enforcement officers, part of the Home Office, are joining colleagues from Avon and Somerset Police in a crackdown on road offences and migrants working illegally.
The West of England and Wales has seen the highest number of arrests over the last year for illegal workers outside of London.
“It is a problem… we’re tackling it,” Murad Mohammed, from Immigration Enforcement, says. He covers all the devolved nations.
“This is just one of the operations going on around the country, every day of the week, every month of the year.”
Image: Murad Mohammed, from Immigration Enforcement, says his team are attempting to tackle the issue
Just outside the Cabot Circus shopping complex, we stop a young Albanian man who arrived in the UK on the back of a truck.
He’s on an expensive and fast-looking e-bike, with a new-looking Just Eat delivery bag.
He says he just uses it for “groceries” – but the officer isn’t buying it. He’s arrested, but then bailed instantly.
We don’t know the specifics of his case, but one officer tells me this suspected offence won’t count against his asylum claim.
Such is the scale of the problem – the backlog, loopholes and the complexity of cases – that trying to keep on top of it feels impossible.
This is one of many raids happening across the UK as part of what the government says is a “blitz” targeting illegal working hotspots.
Angela Eagle, the border security and asylum minister, joins the team for an hour at one of Bristol’sretail parks, scattered with fast food chains and, therefore, delivery bikes.
Image: Border security and asylum minister, Angela Eagle, speaks to Sky News
She says arrests for illegal working are up over the last year by 51% from the year before, to more than 7,000.
“If we find you working, you can lose access to the hotel or the support you have [been] given under false pretences,” she said.
“We are cracking down on that abuse, and we intend to keep doing so.”
There are reports that asylum seekers can rent legitimate delivery-driver accounts within hours of arriving in the country – skipping employment legality checks.
Uber Eats, Deliveroo, and Just Eat all told Sky News they’re continuing to strengthen the technology they use to remove anyone working illegally.
But a new Border Security Bill, working its way through Parliament, could see companies fined £60,000 for each illegal worker discovered, director disqualifications and potential prison sentences of up to five years.
“I had them all in to see me last week and I told them in no uncertain terms that we take a very tough line on this kind of abuse and they’ve got to change their systems so they can drive it out and off their platforms,” the minister tells me.
For some of those who arrive, a bike and a phone provide a way to repay debts to gang masters.
There were eight arrests today in Bristol, one or two taken into custody, but it was 12 hours of hard work by a dozen immigration officers and the support of the police.
As two mopeds are pushed onto a low-loader, you can’t help but feel, despite the best intentions, that at the moment, this is a losing battle.