Homebuilding slowed dramatically across the country in 2022 as mortgage rates rose, scaring away potential buyers. The construction starts of single-family homes dropped nearly 19% year over year in September, while building permits fell 17%, according to the Census Bureau.
Building permits are seen as a measure of future construction. In October 2022, home sales dropped for the ninth straight month.
U.S. homebuilders did exceptionally well at the beginning of the coronavirus pandemic. Interest rates fell to a record low, demand soared as people cooped up at home looked for more room, and home prices rose 40% in two years. Homebuilders could not keep up.
But that scenario flipped as interest rates rose and the market suffered a sharp setback.
Three of the top 20 metropolitan areas that made this list are in Arkansas, while another five are in West Virginia. Both states are among the poorest in the country. Arkansas home prices ranked the third-lowest in the country, according to the Arkansas Economic Development Commission. Sixteen of the 20 metropolitan areas are in the South or Midwest.
The metropolitan area that tops the list is Bremerton, Washington, a one-hour ferry ride from Seattle and home to the West Coast’s second-largest naval base, Naval Base Kitsap. Housing prices are flat across the Seattle area compared to a year ago, and in Kitsap County, the median home sold for $505,471 in November, up about 1%.
Nashville MLS analyzed data from the Census Bureau’s Building Permits Survey to rank the top 20 metropolitan areas where construction is slowing the most based on the decrease in approved building permits from January and February 2022 to September and October 2022.
The analysis used two months of data to account for monthly variation and was limited to 236 metros with 100 or more permits in January and February out of the 384 metros with available data. Metro areas often include the identified city, nearby municipalities, and suburbs.
Homebuilders are warning that high interest rates could continue to worry buyers throughout 2023.