If the U.S. is to build its way out of the curr🎐ent housing shortage, it needs homebuilding to take off like a rocket. In May, at least, it fizzled on the launchp꧑ad. 

The pace of homebuilding slowed in May to a seasonally adjusted annual rate of 1.28 million per year, the Census Bureau said Thursday. That's down from 1.35 million in April and well below the 1.38 million forecasters expected, according to a survey of economists from Dow Jones Newswires and The Wall Street Journal. It was also the slowest pace of new home construction since June 2020.

Building permits, an indicator of future groundbreaking, were also down, falling to an annual rate of 1.39 million from 1.44 million in April, and missing the🃏 median forecast for 1.45 million.

There’s no lack of people who need new homes. High demand for housing, driven partly by a worsening housing shortage, has pushed 澳洲幸运5官方开奖结果体彩网:home prices to record highs. But those high prices, combined with high mortgage rates, have pushed monthly mortgage payments 𒅌out of reach of many would-be buyers. 

“The scarcity of existing homes on the market should benefit new construction, though affordability remains a substantial challenge for many hom𒁃ebuyers, particularly those purchasing for the first time,” wrote Wells Fargo economists Sam Bullard and Patrick Barley.

Homebuilders Aren't Optimistic

As a result of high mortgage rates, leaders in the homebuilding industry have become pe𝐆ssimistic that custꦦomers can afford what they build.

The June edition of the National Association of Home Builders/Wells Fargo Housing Market Index, which measures how builders assess business conditions, fell to its lowest level since last December, the association said Wednesday. At a rating of 43, the indicator stayed below tꦅhe significant “50” mark, which indicates more builders believe the outlook is good rather than bad. 

"Builders are in an ‘if you build them, they won’t come’ market, as continued high mortgage rates keep more potential buyers out of the market,” said Robert Frick, corporate economist with Navy Federal Credit Union. “Real relief to the housing crisis may now have to wait until next year when, presumably, the Fed will reduce rates as inflation continues its slow decline."

A Federal Reserve Rate Cut Could Loosen the 🍸Gridlock

There is some possible relief on the horizon for potential homebuy🧸ers.𒁃

The average rate for a 30-year mortgage offered this week was 6.87%, continuing a downward trend that began in early May, according to Freddie Mac. However, that's still far above the record low of 2.65% reached in 2021.

Mortgage rates are influ♉enced by the fed funds rate, which the Federal Res🌳erve has kept at a 23-year high in order to drive up borrowing costs, reduce borrowing and spending in the economy, and keep inflation in check.

Inflation has been more tame in the past few months and that has made financial markets hopeful the Fed might 澳洲幸运5官方开奖结果体彩网:cut its key interest rate late🔥r in the y🔯ear, potentially pro🦄viding some relief on mortgꦅage rates. 

“While a growing population and workforce are providing some support, U.S. home builders won't become busier until borrowing costs fall,” wrote Sal Guatieri, senior economist at BMO. “Thankfully, this is one more report pushing the needle toward a Fed rate cut later this year.”