Is there a housing-price spiral?

 In Housing

Higher interest rates, while slowing overall inflation, could ultimately push home prices and rents even higher, The Wall Street Journal reports. As the Federal Reserve lifts rates to slow an increase in consumer prices, it has also raised the cost of building and buying homes. In theory this should slow development and curb rising land and construction costs. Yet some analysts say that a development slowdown could also aggravate the existing housing shortage, fueling competition among buyers and causing home prices to spike.


  • But defying analyst expectations, housing starts jumped 21.7% in May — the most since 2016 — as homebuilders responded to limited inventory in the resale market.


By Cate Chapman, Editor at LinkedIn News

May Housing Starts: Housing Starts Surge Amid Inventory Shortage

Housing starts and permits soared in May, with housing starts at the highest level seen in over a year.

  • Housing starts increased to 1.63 million (SAAR) in May, up 21.7% from revised April 2023 figures and up 5.7% from May 2022, according to the U.S. Census Bureau.
  • Single family housing starts increased to just under 1 million (SAAR) in May, up 18.5% from April and down 6.5% from a year ago.
  • Housing permits issued in May were up 5.2% from April and down 12.7% from a year ago, to 1.49 million (SAAR).
  • 1.52 million (SAAR) homes were completed in May, up 9.5% from April and up 5% year-over-year.

What happened: Housing starts and permits soared in May, with housing starts at the highest level seen in over a year.

What it means: Home builders are responding to an increase in new home sales and an extremely low level of existing home inventory by getting a jump start on new projects.

What Zillow Senior Economist Nicole Bachaud thinks: Low inventory of existing homes available for sale has pushed many buyers who can afford to stay shopping to look towards new construction, and home builders are taking notice. With incentives sweetening the deal for buyers, new home sales have been rising amid falling existing home sales – raising homebuilder confidence from the lows seen in the last year. And with this bump in demand for new homes, permits and starts are back in the positive, soaring past April numbers. With new home completions up as well, a steady flow of new homes are making their way to the market when they are needed the most. This is welcomed news in today’s challenging market.


Nicole Bachaud

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