Mortgage demand hits lowest level since 1995 as new construction rebounds

Published

2 years 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.

Politics

Why Boris’s best mate is off to Reform

Published

2 hours ago

July 10, 2025

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Former Conservative chairman and friend of Boris Johnson – Sir Jake Berry – is defecting to Reform UK, causing more problems for Tory leader Kemi Badenoch.

On today’s episode, Sky News’ Sam Coates and Politico’s Anne McElvoy discuss if his defection will divide parts of Reform policy.

Elsewhere, the Anglo-French summit gets under way, with Prime Minister Sir Keir Starmer hoping to announce a migration deal with French President Emmanuel Macron to deter small boat crossings.

Plus, chatter around Whitehall that No10 are considering a pre-summer reshuffle, but will it have any value?

US

Donald Trump praises Liberian president’s English – the country’s official language

Published

2 hours ago

July 10, 2025

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Donald Trump praises Liberian president's English - the country's official language

Donald Trump has praised the Liberian president’s command of English – the West African country’s official language.

The US president reacted with visible surprise to Joseph Boakai’s English-speaking skills during a White House meeting with leaders from the region on Wednesday.

After the Liberian president finished his brief remarks, Mr Trump told him he speaks “such good English” and asked: “Where did you learn to speak so beautifully?”

Mr Trump seemed surprised when Mr Boakai laughed and responded he learned in Liberia.

The US president said: “It’s beautiful English.

“I have people at this table who can’t speak nearly as well.”

Mr Boakai did not tell Mr Trump that English is the official language of Liberia.

The country was founded in 1822 with the aim of relocating freed African slaves and freeborn black citizens from the US.

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Mr Trump promised the leaders of Liberia, Senegal, Gabon, Mauritania and Guinea-Bissau a pivot from aid to trade at the surprise meeting.

He described the countries as “all very vibrant places with very valuable land, great minerals, and great oil deposits, and wonderful people”.

Later asked by a reporter if he’ll visit the continent, Mr Trump said, “At some point, I would like to go to Africa.”

But he added that he’d “have to see what the schedule looks like”.

Trump’s predecessor, President Joe Biden, promised to go to Africa in 2023, but only fulfilled the commitment by visiting Angola in December 2024, just weeks before he left office.

US

Gaza permanent ceasefire ‘questionable’, says Israeli government

Published

2 hours ago

July 10, 2025

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Gaza permanent ceasefire 'questionable', says Israeli government

The Israeli government believes the chances of achieving a permanent ceasefire in Gaza are “questionable”.

The pessimistic assessment, in a top-level Israeli government briefing given to Sky News, comes as the Israeli Prime Minister prepares to leave Washington DC after a four-day visit which had begun with the expectation of a ceasefire announcement.

Benjamin Netanyahu will leave the US later today with the prospect of even a temporary 60-day ceasefire looking extremely unlikely this week.

Within “a week, two weeks – not a day” is how it was framed in the background briefing late on Wednesday.

Crucially, though, on the chances of the ceasefire lasting beyond 60 days, the framing from the briefing was even less optimistic: “We will begin negotiations on a permanent settlement. But we achieve it? It’s questionable, but Hamas will not be there.”

Sky News has spoken to several Israeli officials at the top level of the government. None will be drawn on any of the details of the negotiations over concerns that public disclosure could jeopardise their chances of success.

But I have been given a very clear understanding of Mr Netanyahu’s thinking.

The Israeli position is that a permanent ceasefire (beyond the initial 60 days, which itself is yet to be agreed) is only possible if Hamas lays down its arms. “If they don’t, we’ll proceed [with the war],” said a source.

The major sticking point in the talks between Hamas and Israel is the status of the Israel Defence Forces (IDF) inside Gaza during the 60-day ceasefire and beyond, should it last longer.

The latest Israeli proposal, passed to Hamas last week, included a map showing the proposed IDF presence inside Gaza during the ceasefire.

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.

My briefing of Mr Netanyahu’s position is that he has not shifted in terms of Israel’s central stated war aims. The return of the hostages and eliminating Hamas are the key objectives.

But in a hint of how hard it will be to reconcile the differences, it was clear from my briefing that no permanent ceasefire is possible in the Israeli government’s view without the complete removal of Hamas as a political and military entity.

Hamas is not likely to negotiate its way to oblivion.

On the status of the Israeli military inside Gaza, a senior Israeli official told Sky News: “We would want IDF in every square metre of Gaza, and then hand it over to someone.”

It was clear to me that Mr Netanyahu wants his stated position to be that his government has no territorial ambition for Gaza.

One quote to come from my briefing, which I am only able to attribute to a senior Israeli official, says: “[We] don’t want to govern Gaza… don’t want to govern, but the first thing is, you have to defeat Hamas.”

Another clear indication of Mr Netanyahu’s position – a quote from the briefing, attributable only to a senior Israeli official: “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, it’s clear from my briefings that Mr Netanyahu continues to rule out the possibility of a two-state solution “for the foreseeable future”.

The Israeli government assessment is that the Palestinians are not going to have a state “as long as they cling to that idea of destroying our state”.

On the most controversial aspect of the Gaza conflict – the movement of the population – the briefing revealed that Mr Netanyahu’s view is that 60% of Palestinians would “choose to leave” but that Israel would allow them to return once Hamas had been eliminated.

“It’s not forcible eviction, it’s not permanent eviction,” a senior Israeli official said.

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.”