2 More Reasons Why Home Building is Slowing Down

Zonda released their second quarter New Home Lot Supply Index last week and the index is down 9.3% from last year and the index measuring supply dropped by 2.2% from the first quarter. This index reflects the number of single-family vacant developed lots that are ready to be built upon. Denver saw the 3rd biggest drop in land/lot supply with a drop of 24% from a year ago. OUCH!!! Nationally, there are 28% more lots being developed this year than last year which is a good sign.

Another factor slowing home construction I have been reading is directly due the Fed’s rate increases as loans to purchase land, develop, and construct homes have seen rates rise from .75% to nearly 2% in the second quarter from the first quarter.

The very last thing we need right now is for builders to slow down the pace of construction as we have an estimated national shortage of approximately 5 million units. One of my favorite analysts Logan Mohtashami from Housing Wire wrote last week that the pace of permits and starts will continue to drop until mortgage rates get close to 4%.