“For the past several years, shortages of labor and lots along with rising regulatory costs have led to a slow recovery in single-family construction,” said NAHB Chief Economist Robert Dietz. “While home price growth accommodated increasing construction costs during this period, rising mortgage interest rates in recent months coupled with the cumulative run-up in pricing has caused housing demand to stall.”
The Federal Reserve is slated to decide on interest rates in December, which could result in the fourth and final rate hike to end 2018. Last month, the central bank raised the federal funds rate by another 25 basis points to bring its current level to 2.25.
According to the NAHB, the housing market accounts for roughly 15-18% of the United States’ gross domestic product. If the Fed sees the housing market too far in the rearview mirror going forward, it may posit further before continuing future rate hikes.
Right now, the CME Group’s FedWatch algorithm shows a 65.4% chance of a rate hike in December.
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