Mortgage rates 'likely to keep moving higher': Economist

U.S. housing starts in September rebounded by seven percent, but building permits dropped by over four percent, signaling a decrease in future construction. Realtor.com Chief Economist Danielle Hale joins Yahoo Finance Live to discuss what recent housing data means for the housing market.

“The big-picture momentum in the housing market is that we’re undersupplied, but that it’s shifting as... buyers confront major headwinds from higher mortgage rates and higher home prices and higher rental costs,” Hale says, “even though they’re easing they remain quite high. It’s a tough market to find a place to live right now.”

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Video Transcript

JULIE HYMAN: We saw some relief in housing data construction of new US homes rebounding by 7% in September. This coming after a 1.5% plunge in August. But building permits did fall by over 4%. That signals a drop in future construction. With more on this, we're joined by Danielle Hale, Realtor.com chief economist.

Danielle, and I know a lot of the boost in what we saw here was also from multifamily starts. So how do we put-- how do we put all this data together that we've gotten in the past 24 hours in terms of what it tells us about any relief in the housing market?

DANIELLE HALE: Yeah, I think that's a great question, Julie. So you've got multifamily starts that ticked up alongside single family starts. It's a little bit of a simplification, but you can think about multifamily as representing the for-rent side of the housing market and single family renting, the for-sale side of the housing market. That's a little oversimplification but pretty good for most purposes.

And what we've seen is that rental construction and for-sale construction has ticked up, creating more supply. But we're still in an environment where there's not a ton of supply in for-sale market. And we're getting to better supply conditions in the rental market. But still, you know, if you look back over the last 10 years, we haven't built enough homes to keep up with households.

So the big picture momentum in the housing market is that we're undersupplied. But that it's shifting as, you know, confront major headwinds from higher mortgage rates and higher home prices and higher rental costs. Even though they're easing, they remain quite high, it's a tough market to find a place to live right now.

JOSH LIPTON: And Danielle, I'm interested do you think there's local, anything local officials and regulators could and should be doing to encourage more construction?

DANIELLE HALE: Yeah. I think that's a great-- I think that's a great question. So making sure that, you know, permits get approved in a clear fashion and expedited manner, I think that can really add a lot of costs to builders in the process of getting homes to the market. Local regulation, the unpredictability of the permitting process, making sure that they're keeping up with any local building codes and to the extent that there's more stability in those codes, I think that can also help them get to market sooner.

You know, there's a lot of local initiatives underway right now, that happen to be happening in my neighborhood, for instance, to increase density and to make it easier for builders to build smaller units that are, say, duplexes instead of single family homes or triplexes instead of single family homes to increase the density and enable builders to build more housing at an affordable price point, because that's the area of the market where we see the least supply and the most demand.

So if we can figure out how to fill in those gaps, I think that'll be really important. Housing affordability is number one with mortgage rates at 23-year highs and likely to keep moving higher. As 10-year treasuries and other interest rates move up, we're likely to see similar trends in the mortgage market. And so I think it's going to continue to be a major pain point for households. So anything we can do to address the supply of those affordable housing units will help.