U.S. new home construction plummets on surging mortgage rates

Photo taken on July 21, 2022 shows a panoramic view of Manhattan, New York City, the United States. (Photo by Emma Li/Xinhua)

Single-family home construction, which encompasses the largest chunk of the homebuilding sector, dropped a dramatic 6.1 percent - the lowest level since May 2020, when the COVID-19 pandemic was in full swing.

WASHINGTON, Nov. 17 (Xinhua) -- Homebuilding in the United States dropped in October, with the building of single-family units falling to its lowest level in over two years, as sharply rising mortgage rates have made it more difficult to purchase homes.

Housing starts fell 4.2 percent in October, according to data published by the Commerce Department on Thursday.

Single-family home construction, which encompasses the largest chunk of the homebuilding sector, dropped a dramatic 6.1 percent - the lowest level since May 2020, when the COVID-19 pandemic was in full swing.

Starts for home-building projects encompassing five or more units dropped 0.5 percent.

The decreases came as the U.S. Federal Reserve increased interest rates in a bid to tamp down the worst inflation in four decades.

Those interest rate increases have directly impacted mortgage rates.

According to Freddie Mac, which finances mortgages, the current average for a 30-year fixed mortgage rate stands above 7 percent - the highest in two decades.

Despite multiple interest rate hikes in recent months, inflation remains stubbornly high, eating away at the finances of those who struggle to make ends meet.

The Fed is in the difficult position of trying to slow the rise of inflation by slowing the economy but trying not to act too aggressively and trigger a recession.

Markets have taken a beating due to heightened interest rates, which make it more difficult for companies to borrow money.