New Home Construction Takes Double-Digit Tumble

What Thursday’s Economic Reports Tell Us

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Family looking at house under construction

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Fewer new homes were constructed in May as the overheated housing market cooled, and weekly unemployment remained low, reports showed Thursday.

Here’s a quick look at the most significant economic indicators of the day and what they tell us.

New Home Construction

  • In May, construction of new homes was 14.4% lower than in April, as builders continued to lose confidence in the housing market. Construction on nearly 1.55 million homes began in May, according to the Census Bureau, compared with 1.8 million in April. Meanwhile, construction on 1.47 million homes was completed in May, 9.1% more than in the prior month. 
  • While the drop in the number of new homes being built may seem grim, analysts say it’s actually a sign of the market righting itself. Red-hot demand for homes is cooling amid higher mortgage rates, leaving more options for those who are still looking to buy. 
  • The number of building permits also came in lower than expected in May, but economists said they don’t expect activity to take a drastic plunge.

Initial Jobless Claims 

  • Fewer people filed first-time jobless claims last week than the week before, but the number of claims was more than analysts expected. According to the Department of Labor, 229,000 people filed for unemployment for the week through June 11, compared with 232,000 a week earlier. Analysts had expected 220,000.
  • Economists said the labor market remains stable, but they are keeping an eye on the four-week moving average for initial jobless claims, which inched up to 218,500 from 215,750 the week before. If that number crosses the 250,000 mark and stays there, it could be a warning sign that layoffs are increasing.

Mortgage Rates

  • Mortgage rates haven’t been this high in nearly 14 years. The average 30-year fixed-rate mortgage jumped to 5.78% this week, more than half a percentage point higher than the week before, according to Freddie Mac.
  • Other surveys of mortgage rates have already passed the 6% mark.
  • Rates popped along with the 10-year Treasury yield, which typically leads mortgage rates, after last week’s higher-than-expected inflation report.

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  2. Department of Labor. “News Release.”

  3. Freddie Mac. “Mortgage Rates.”

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