You’ve heard the saying: Don’t start something you can’t finish. Well, it appears that U.S. homebuilders are not heeding that advice.
As our featured chart of the week above shows, the gap between the number of new home constructions started and the number of new home constructions completed has grown wider in recent months. In April, there were 1.724 million new housing starts compared to just 1.295 million new houses completed. That gap of roughly 429,000 homes is the most since 1984.
Why is this happening? A combination of a labor shortage and supply chain snags are mostly to blame. The housing market is also very sensitive to rising interest rates. The 30-year mortgage rate in the U.S. is about 5.3% currently, up from roughly 3% a year ago.
Overall, then, it appears that the housing construction market is caught in the middle of a transitional phase, with sharply rising mortgage rates and declining affordability on the one hand and supply-chain constraints on the other, with the result being a rising backlog of projects.
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