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housing market 2024 begins in recession as both housing starts and permits for new construction decline census Bureau Reported on Friday.
It initially fell 14.8%, far more than the flat reading expected by economists. Permits declined 1.5%, in line with estimates.
“The homebuilding revival is coming, but it didn’t come in January,” said Robert Frick, corporate economist at Navy Federal Credit Union. “Higher mortgage rates, perhaps coinciding with colder weather, led to a decline in permits and occupancy beginning in December. We know builders are ready to accelerate when rates fall, which could also happen in the spring.”
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Although the housing market is struggling with high mortgage rates, inclement weather across many parts of the country appears to be the biggest reason for the sharp decline in activity in the first month of the year.
“The largest declines in January occurred in areas that were hit the hardest by the largest winter storms,” said Lisa Sturtevant, chief economist at Bright MLS. “In the Northeast, new starts declined 20.6% month over month, while new starts in the Midwest declined 30% month over month.”
Compared to a year ago, permits were up 8.6%, while starts were up a modest 0.7%.
“The outlook for the single-family new home market is positive, but challenges remain,” said First US economist Ksenia Potapov. “Potential home buyers are sensitive to mortgage rate fluctuations, while builders face headwinds such as high construction costs and a shortage of buildable lots and skilled labor.”
“But builders are benefiting from the lack of resale inventory,” he said. “They also have the ability to offer incentives such as mortgage rate cuts or even price reductions to entice buyers. When there are no suitable existing homes for sale, a new home at the right price can be a good option.
The National Federation of Independent Business small business optimism index released earlier this week fell two points in January to 89.9, the 25th consecutive month it has fallen below the 50-year average of 98. The percentage of business owners expecting actual sales to be higher decreased by 12. Marks up negative 16% from December, a sharp negative shift.
“Small business owners continue to make appropriate business adjustments in response to ongoing economic challenges,” said Bill Dunkelberg, NFIB chief economist. “In January, optimism among small business owners waned as inflation remains a major hurdle on Main Street.”
However, a survey by American Express on Thursday found that businesses are feeling optimistic about 2024, with 85% of small businesses saying they are satisfied with the success of their business and 86% saying they have achieved their 2023 business goals. Have taken.
The optimism is a change from August 2023, when 80% of small businesses surveyed said their long-term financial confidence was being negatively impacted by the economy. Nearly 50% of small business owners said they plan to expand in 2024.
“Even in uncertain economic circumstances, small businesses continue to demonstrate resilience and dedication,” said Gina Taylor, executive vice president and general manager, Small Business Products and Business Blueprint at American Express. “Our latest data shows that small businesses are looking positive ahead to 2024 and are taking steps, including hiring and implementing new tools, to remain active and competitive.”
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