With building permits for new homes falling last month to their lowest levels since 2020, one real estate expert warned of a “double whammy” coming to the market that will leave average Americans without affordable housing, and applauded a Florida initiative trying to fix the problem. issue.
“It’s a double whammy. It’s the lack of demand and the decline in demand because shoppers and consumers can no longer afford to buy what they could have bought last year, or they’re out of the market. And then on the market side development, the credit markets are essentially freezing up,” Peebles Corporation Chairman and CEO Don Peebles said on “Mornings with Maria” on Tuesday.
Peebles’ comments come as US new home construction plunged again in November as high mortgage rates combined with widespread inflation continued to dampen demand and the once-hot housing market.
Home starts fell 0.5% last month to an annual rate of 1.427 million units, according to new Commerce Department data released Tuesday. Applications to build, which measures future construction, fell to an annual rate of 1.34 million units, an 11.2% decline from October. Permits for the construction of single-family homes, which account for the bulk of home construction, also fell 7.1% to the lowest level since May 2020.
HOME BUILDERS SENTIMENT SINKS IN DECEMBER FOR THE 12TH CONSECUTIVE MONTH
Two key market factors triggered this demand destruction, according to the real estate expert.
“Right now, Americans have been plagued by pulling cash out of their pockets with out-of-control inflation, and now this extreme reaction of rapidly increasing interest rates has taken away their buying power on the two largest purchases they make”. will make in their lifetime,” which Peebles says are home and car purchases.
Peebles expanded on that idea, stating that a homebuyer with a budget of $500,000 last year can now only afford to buy a $250,000 home, and currently “there’s nothing to buy at that price.”
“Interest rates are driving most people out of the market or lowering them to a commodity they don’t want to buy,” Peebles said, “and I think that will continue.”
Last Friday, Florida’s Republican Gov. Ron DeSantis approved legislation aimed at fixing the state’s troubled homeowners insurance system. The bill seeks a billion-dollar reinsurance fund, reduced litigation costs and forcing some customers to leave a state-created insurer.
Florida has struggled to maintain stability in the state’s insurance market since 1992, when Hurricane Andrew swept through Homestead, killing some insurance companies and leaving many companies fearful of writing or renewing policies in the state. Risks for carriers have also been increasing as climate change increases hurricane strength and storm intensity.
“Something needs to be done about these out-of-control insurance costs. But at the same time, insurers are taking on a huge risk: you’re taking a big risk to insure yourself in Florida, you’re taking a big risk to insure yourself in California.” , especially anywhere there have been wildfires,” Peebles reacted. “So I think DeSantis, this movement will focus on trying to help the average person be able to live in their homes.”
The real estate expert said the state of Florida “had no choice” but to intervene, claiming that high insurance costs would prevent people from moving there.
“Fewer people will move to Florida if they can’t afford their homes or can’t afford insurance because lenders will require it. Consumers are being hit hard, so I think they don’t have a choice,” he said. “If they don’t step in, then the taxpayers will have to pay for it in another way. I think that was a very smart move.”
GET FOX BUSINESS ON THE GO BY CLICKING HERE
Peebles called for other states to take the lead from Florida and predicted a housing “recovery” once inflation is under control.
“If you look at it from a government perspective, there’s no real policy on how we’re going to address some of these things. Americans need homes. They need a place to live,” said the CEO of Peebles Corporation. “We are short in every major market for housing and we also have an affordable housing crisis in most major cities across the country.”
READ MORE ABOUT FOX BUSINESS
Megan Henney of FOX Business and The Associated Press contributed to this report.