Rising interest rates hurt housing starts in 2013

Housing construction starts totaled 923,400 units in 2013, missing analysts’ expectations and falling well below the long-term annual average of 1.5 million starts.

A dearth of buildable sites and tight job markets in some areas contributed to the low numbers, according to housing experts. But the biggest culprit was the 1 percentage point rise in interest rates following Federal Reserve chairman Ben Bernanke’s comments in May about tapering the bond-buying program, they said.

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“I suspect that builders could have built up to 1 million units even with the supply issues they were facing,” David Crowe, chief economist for the National Association of Home Builders, told the Wall Street Journal. “They didn’t, only because consumer demand weakened a bit as buyers saw mortgage rates rise.”

The home builders’ association predicts an improvement in 2014, with housing starts growing to to 1.2 million, the paper said. [WSJ]  – Hiten Samtani