In US housing market, homebuilders are wary of starting new projects

Permits to build new houses fell by double digits in November.
Wrapping up what we started. 
Wrapping up what we started. 
Photo: Andrew Kelly (Reuters)
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Builders, faced with high interest rates and even higher construction costs, are now focused more on completing existing projects than starting new ones.

According to US Census Bureau data, new housing construction has plunged while completed projects have skyrocketed. In November, new projects declined by 0.5% compared to October while finished projects increased by a whopping 10.8%. Permits for new construction meanwhile, dropped by 11.2%.

Builders are being crushed by high interest rates and construction costs. According to Freddie Mac, the current rate for a 30-year mortgage is 6.31% versus 3.11% at the start of the year. This is in part because mortgage lenders had fewer buyers for their loans once the Federal Reserve began tightening financial conditions.

Construction costs, meanwhile, have risen 30% since the beginning of the year because of persistent supply chain issues, according to the National Association of Homebuilders.

While the price of some building materials, like lumber, have stabilized, appliances and home furnishings continue to get more expensive. As a result, builders are struggling to offer discounted homes even as demand for new housing decreases in response to higher mortgage rates.