Fed Pivots and Housing Starts Surge
NAHB Chief Economist Robert Dietz recently provided the following economic overview in his bi-weekly newsletter Eye on the Economy.
Interest rates have pulled back in recent weeks, as markets correctly anticipated a dovish Federal Reserve announcement in December. In fact, the Fed surprised by not only remaining on pause with respect to the federal funds rate (which was last increased in July), but also by revealing an estimated three rate cuts for 2024. NAHB is currently forecasting just two rate cuts in 2024: one 25 basis-point cut in the third quarter and one more in the fourth quarter.
Long-term interest rates responded positively to these developments. The 10-year Treasury bond has approached a 3.9% rate, down just about 100 basis points from October high levels. And mortgage rates have retreated below 7% for the first time since the middle of August. Inflation appears to be moving in the right direction as well, with the CPI growing at a 3.1% rate in November. However, policy makers should take note: Shelter cost growth accounted for 70% of the headline gain in November. Only additional construction of attainable, affordable housing will ultimately tame shelter inflation.
With the growing wave of good macro news, builder sentiment has turned the corner. While still gloomier than actual market conditions, the NAHB/Wells Fargo Housing Market Index increased three points in December to a level of 37. We expect continued improvement ahead. However, the index’s partial and, we believe, temporary disconnect from starts/permit activity is indicating that supply-side constraints continue to frustrate the market, and that larger builders are gaining market share over more capital-constrained private builders.
In contrast, single-family starts surged in November as rates moved lower. Single-family starts increased 18% to a 1.14 million seasonally adjusted annual rate. However, single-family starts are down 7.2% year to date. The multifamily sector, which includes apartment buildings and condos, increased 6.9% to an annualized 417,000 pace.
Lower interest rates and a lack of resale inventory helped to provide a strong boost for new home construction in November. However, it would not be surprising to see these construction data retreat in December because of last month’s accelerated pace and ongoing supply-side concerns (or the November data to be revised lower).
Nonetheless, the macro and housing data suggest next year will see gains for single-family construction, while a rise in the level of new multifamily rental completions will continue to hold back multifamily construction activity.
Latest from NAHBNow
Oct 30, 2025
Senate Approves 3 Resolutions to Limit President’s Tariff AuthorityThe Senate has voted to approve three resolutions that would rescind President Trump’s authority to impose tariffs on foreign imports based on national security considerations.
Oct 30, 2025
Avoiding Lender Failure: 4 Costly Lessons from a Real Builder's StoryFinancing isn’t just about funding — it’s about trust. Even experienced teams can get blindsided when the wrong lender sits across the table. Here are four costly lessons every spec builder should learn before signing their next loan.
Latest Economic News
Oct 30, 2025
Which Local Markets Track National Trends the Most: 2024 Single-Family MAIThe National Association of Home Builders developed the Single-Family Market Association Index (MAI) to measure how closely single-family building permits in metro areas follow national patterns. By comparing local and national trends, the MAI helps industry leaders and forecasters better understand and predict housing market activity.
Oct 29, 2025
The Fed Cuts amid Partly Cloudy ConditionsWith the government shutdown limiting the quantity of economic data available to markets and policymakers, the central bank’s Federal Open Market Committee (FOMC) enacted a widely anticipated 25 basis point cut for the short-term federal funds rate.
Oct 28, 2025
Home Price Growth SlowsHome prices in August grew at the lowest annual rate in over two years, according to the recent release of the S&P Cotality Case-Shiller Home Price Index (seasonally adjusted – SA).
