The slump in U.S. homebuilding in the third quarter has weighed on gross domestic product for nearly 15 years, as soaring mortgage rates have dealt a hammer blow to demand.
Residential investment plunged an annualized 26.4% over the period, marking the sixth consecutive quarterly decline, government figures released Thursday showed. The crisis subtracted a whopping 1.37 percentage points from GDP, the most since the last three months of 2007 and the start of the Great Recession.
The string of declines in homebuilding follows some of the biggest gains on record in 2020, when ultra-low borrowing costs and the boom in remote work fueled a growing appetite for new homes.
Mortgage rates have soared this year in a sharp and rapid shift as the Federal Reserve moves to tackle decades-high inflation. The average 30-year mortgage rate topped 7% this week for the first time since 2002, data from Freddie Mac showed on Thursday.
The drop in housing investment was driven by a 36.6% annualized drop in the construction of single-family homes, the biggest drop since the second quarter of 2009. The figures match a government report last week showing the weakest pace of single-family home construction since the spring of 2020, when the economy was still reeling from Covid-imposed lockdowns.
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