With new home building permits falling last month to their lowest levels since 2020, a real estate expert has warned of a “double whammy” coming to the market that will cost average Americans an affordable home – and cheered a Florida initiative trying to fix the problem.
“It’s a double whammy. It’s lack of demand and falling demand because buyers and consumers can no longer afford to buy what they could have bought last year, or are priced out of business. development, the credit markets are essentially frozen,” Peebles Corporation chairman and chief executive officer Don Peebles told “Mornings with Maria” on Tuesday.
Peebles’ comments come as US new home construction plummeted again in November as high mortgage rates combined with pervasive inflation continued to cool demand and the once scorching housing market.
Starting housing fell 0.5% last month to an annual rate of 1.427 million units, according to new Commerce Department data released Tuesday. Planning applications – which measures future construction – fell at an annual rate of 1.34 million units, down 11.2% from October. Permits to build single-family homes, which account for the largest share of housing, also fell 7.1% to their lowest level since May 2020.
HOME BUILDER SENTIMENT GROWS FOR 12TH CONSECUTIVE MONTH IN DECEMBER
Two key market factors triggered this demand destruction, according to the real estate expert.
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“Right now, Americans have been smitten with pulling money out of their pockets with runaway inflation, and now this extreme reaction of rapidly rising interest rates has taken away their purchasing power on the two biggest purchases. what they’ll do in their lifetime”, which Peebles argued are home and car purchases.
Peebles expanded on this idea, arguing that a homebuyer who budgeted $500,000 last year can now only afford to buy a $250,000 home — and right now there’s “nothing to buy at that price.” .
“Interest rates are pricing most people out of business or discounting them a product they don’t want to buy,” Peebles said, “and I think that will continue.”
On Friday, Republican Florida Governor Ron DeSantis passed legislation aimed at fixing the state’s troubled property insurance system. The bill includes a $1 billion reinsurance fund, reduced litigation costs and forcing some customers out of a state-created insurer.
Florida has struggled to maintain stability in the state’s insurance market since 1992, when Hurricane Andrew leveled Homestead, wiped out some insurance companies, and left many remaining companies fearful of signing or renewing policies in the state. Risks to vectors have also increased as climate change increases the strength of hurricanes and the intensity of thunderstorms.
“Something needs to be done about these out-of-control insurance costs. But at the same time, carriers are absorbing a huge risk. You’re taking a big risk to get insurance in Florida, you’re taking a big risk to get insurance in California, especially wherever there have been fires outside.” control,” Peebles reacted. “So I think DeSantis, this move will focus on helping the average person be able to afford to live in their own homes.”
The real estate expert said the state of Florida has “no choice” but to step in, arguing expensive insurance costs would prevent people from moving there.
“Fewer people are going to move to Florida if they can’t afford their homes or can’t afford insurance because lenders will require it. Consumers are being hit very hard, so I think they have no choice,” he said. “If they don’t intervene, taxpayers will have to pay in another way. I think it was a very smart move.”
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Peebles called on other states to take the lead from Florida and predicted a “recovery” in housing once inflation is under control.
“If you look at it from a government perspective, there’s no real policy on how to address some of these things. Americans need homes. They need a place to live,” said the CEO of Peebles Corporation. “We’re short on all major markets when it comes to housing and you also have an affordable housing crisis in most major cities across the country.”
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Megan Henney of FOX Business and The Associated Press contributed to this report.